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GDP growth and resource utilisation Saltsjöbaden 6 October 2011 First Deputy Governor Svante Öberg. Summary. Resource utilisation can be measured in several different ways, among others as actual GDP in relation to potential GDP (GDP gap)

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  1. GDP growth and resource utilisationSaltsjöbaden6 October 2011First Deputy Governor Svante Öberg

  2. Summary • Resource utilisation can be measured in several different ways, among others as actual GDP in relation to potential GDP (GDP gap) • The financial crisis has lowered the growth rate of potential GDP • Resource utilisation is thus largely normal, even though GDP is only slightly higher than before the crisis

  3. Outline • GDP growth over the longer term • The significance of resource utilisation for monetary policy • The Riksbank’s calculations of potential GDP • The impact of the financial crisis on potential GDP • Different measures of resource utilisation and what they say about resource utilisation at present • The need for continued analyses

  4. 1. GDP growth over the longer term

  5. 1. Actual and trend GDP Logarithmed levels Sources: Statistics Sweden and the Riksbank Note. HP trend derived solely from annual data 1950-2010.

  6. 2. Actual and trend growthAnnual percentage change Sources: Statistics Sweden and the Riksbank Note. HP trend derived solely from annual data 1950-2010.

  7. 2. The significance of resource utilisation for monetary policy

  8. The target for monetary policy is to hold CPI inflation at 2 per cent • The Riksbank also takes into account high GDP, high employment and low unemployment • Resource utilisation is also an indicator of future inflation

  9. 3. Resource utilisation and inflationCorrelation betwen different measures of resource utilisation and CPIF inflation, 0-12 quarters ahead Note. Estimation period is 1997-2006. Sources: Statistics Sweden and the Riksbank

  10. 3. The Riksbank’s calculations of potential GDP

  11. The production function approach

  12. 4. Total factor productivityLogarithmed levels Source: The Riksbank

  13. 5. Capital stockLogarithmed level Note. Capital services Sources: The OECD and the Riksbank

  14. 6. Number of hours workedLogarithmed levels Sources: Statistics Sweden and the Riksbank

  15. 14.0 14.0 GDP GDP, forecast 13.8 13.8 GDP, potential (PF) GDP, HPtrend 13.6 13.6 13.4 13.4 13.2 13.2 13.0 13.0 12.8 12.8 80 85 90 95 00 05 10 15 20 7. Actual and potential GDPLogarithmed levels Sources: Statistics Sweden and the Riksbank

  16. 8. GDP gapPer cent Note. GDP gap (HP) refers to GDP’s deviation from trend calculated with a HP-filter. GDP gap (PF) refers to GDP’s deviation from trend calculated with a production function. Sources: Statistics Sweden and the Riksbank

  17. 9. Hours gapPer cent Sources: Statistics Sweden and the Riksbank Note. Hours gap (HP) refers to the deviation of hours worked from trend calculated with a Hodrick Prescott filter. Hours gap refers to the deviation of hours worked from the Riksbank’s assessed trend for hours worked.

  18. 10. GDP gap, September and in real timePer cent Note. September 2011 refers to the PF gap. Real time refers to the HP gap except from October 2010 and onwards when the PF gap is used. . Sources: Statistics Sweden and the Riksbank

  19. 4. The impact of the financial crisis on potential GDP

  20. 8. GDP gapPer cent Note. GDP gap (HP) refers to GDP’s deviation from trend calculated with a HP-filter. GDP gap (PF) refers to GDP’s deviation from trend calculated with a production function. Sources: Statistics Sweden and the Riksbank

  21. GDP growth 1995–2005: 3.1% per year • GDP growth 2005–2011: 2.0% per year • GDP 2011 about 6 per cent lower than suggested by a projection of 3 per cent per year from 2005

  22. 5. Different measures of resource utilisation and what they say about resource utilisation at present

  23. 8. GDP gapPer cent Note. GDP gap (HP) refers to GDP’s deviation from trend calculated with a HP-filter. GDP gap (PF) refers to GDP’s deviation from trend calculated with a production function. Sources: Statistics Sweden and the Riksbank

  24. 9. Hours gapPer cent Sources: Statistics Sweden and the Riksbank Note. Hours gap (HP) refers to the deviation of hours worked from trend calculated with a Hodrick Prescott filter. Hours gap refers to the deviation of hours worked from the Riksbank’s assessed trend for hours worked.

  25. 11. Capacity utilisationPer cent, seasonally-adjusted data Source: Statistics Sweden

  26. 12. Employment ratePercentage of population aged 16-64 Source: Statistics Sweden

  27. 13. RU indicator and GDP gapStandard deviation and percentage Sources: Statistics Sweden and the Riksbank Note. The RU indicator has been normalised so that the mean value is 0 and the standard deviation is 1. The reference period is 1996-2008. GDP gap according to production function (PF) approach.

  28. 14. Actual and long-term unemploymentPer cent of labour force aged 16-64 Sources: Statistics Sweden and the Riksbank Note. Forecast refers to ages 15-74

  29. 15. Unemployment gapPer cent Note. Unemployment gap refers to the deviation between actual and long-term unemployment in Figure 14. Sources: Statistics Sweden and the Riksbank

  30. 16. Labour shortagesPercentage of companies, seasonally-adjusted data Source: National Institute of Economic Research

  31. 17. Beveridge curvePer cent Note. Years indicate the first quarter of each year. Sources: Statistics Sweden and the Riksbank

  32. Table 1. Resource utilisation, second quarter 2011Gap as percentage and RU indicator in standard deviation ¹Deviation from mean value, percentage points, 1996-2008 ²Deviation from mean value, percentage points, 2000-2008 ³Percentage points, reverse sign

  33. 6. Need for continued analyses

  34. Whatdeterminesthe development of productivity and potential GDP in normal business cycles and in deep recessions? • Particularly TFP • Combine the production function approach and economic short-term statistics • Use micro data

  35. Thank you!

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