Potential output

• December 12, 1997

  Potential output growth: Some long-term projections

  Bank of Canada Review - Winter 1997-1998 John Kuszczak, Richard Dion

  This article examines factors that have affected the growth of potential output since the 1950s and presents three possible scenarios for its growth in the future. The authors conclude that there will be a marked slowing in the future growth of potential output as a result of slow population growth and a reduction in labour force participation as the population ages.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Potential output

• Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada

  Technical Report No. 79 Pierre St-Amant, Simon van Norden

  In this paper, we discuss some methodologies for estimating potential output and the output gap that have recently been studied at the Bank of Canada. The assumptions and econometric techniques used by the different methodologies are discussed in turn, and applications to Canadian data are presented.

  Content Type(s): Staff research, Technical reports Topic(s): Potential output JEL Code(s): D, D2, D24
• May 13, 1997

  Capacity constraints, price adjustment, and monetary policy

  Bank of Canada Review - Spring 1997 Tiff Macklem

  The short-run Phillips curve describes a positive short-run relationship between the level of economic activity and inflation. When the level of demand in the economy as a whole runs ahead of the level of output that the economy can supply in the short run, price pressures increase and inflation rises. This article reviews the origins of the short-run Phillips curve with particular emphasis on the long-standing idea that the shape of this curve may be non-linear, with inflation becoming more sensitive to changes in output when the cycle of economic activity is high than when it is low. This type of non-linearity in the short-run Phillips curve, which is typically motivated by the effects of capacity constraints that limit the ability of the economy to expand in the short run, has recently attracted renewed attention. The article surveys recent research that finds some evidence of this type of non-linearity in the Phillips curve in Canada and considers the potential implications for monetary policy.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Inflation and prices, Monetary policy transmission, Potential output