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Trend TFP Growth in the United States: Forecasts versus Outcomes

Author

Listed:
  • Crafts, Nicholas

    (University of Warwick)

  • Mills, Terence C.

    (Loughborough University)

Abstract
We analyze TFP growth in the U.S. business sector using a basic unobserved component model where trend growth follows a random walk and the noise is a first order autoregression. This is fitted using a Kalman-filter methodology. We find that trend TFP growth has declined steadily from 1.5 to 1.0 per cent per year over the last 50 years. Nevertheless, recent trends are not a good guide to actual medium-term TFP growth. This exhibits substantial variations and is quite unpredictable. Technooptimists should not give best to secular stagnationists simply because recent TFP growth has been weak.

Suggested Citation

  • Crafts, Nicholas & Mills, Terence C., 2017. "Trend TFP Growth in the United States: Forecasts versus Outcomes," CAGE Online Working Paper Series 329, Competitive Advantage in the Global Economy (CAGE).
    • Handle: RePEc:cge:wacage:329
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    Cited by:

    1. Nicolas Carnot & Stéphanie Pamies Sumner, 2017. "GDP-linked Bonds: Some Simulations on EU Countries," European Economy - Discussion Papers 073, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Eric J. Bartelsman, 2019. "From New Technology to Productivity," European Economy - Discussion Papers 113, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Nicholas Crafts, 2017. "Is Slow Economic Growth the ‘New Normal’ for Europe?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 45(3), pages 283-297, September.

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    More about this item

    Keywords

    productivity slowdown; secular stagnation; TFP growthJEL Classification: E32; N12; O47;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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