Published in STUDIES

S. Papaioannou. 2013. | ISBN: 978-960-341-107-9


studies 74 Papaioannou exof 200X294The purpose of this study is to provide an estimate of the medium term trend growth rate of GDP for the period 2011 - 2015. The analysis is based on the identity of GDP, according to which real GDP of a country is decomposed into its five components which are: labor productivity, hours worked per employee, employment rate, labor force participation rate and population. According to this identity, changes in these five components are able to explain the long-term trend growth rate of output. Each individual variable in the GDP identity is decomposed into its trend and cycle, so as to assess its medium-term growth trend.


In order to estimate trends of the individual components of the GDP identity, two alternative filtering techniques are employed, which are the Hodrick-Prescott (HP) and the Kalman filter. After having estimated trends for each individual variable, then the medium-term trend growth rate of GDP is estimated as the sum of these variables. The data used for the econometric estimates cover the period 1995-2010, they are expressed on a quarterly frequency and have been provided by the National Accounts and Labour Force Surveys of ELSTAT, as well as by Eurostat.


The final estimate of the trend growth rate of labor productivity is 0.22%, while the estimate of the trend in hours worked per employee is 0.11 %. The trend growth rate of employment is -2.21%, while trends for labor force participation rate and population are estimated at 0.57% and 0.03%, respectively. Thus, the estimate for the medium term growth rate of GDP stands at -1.28%, as the sum of the individual components. It should be noticed that the trend estimate of -1.28% implies that this will be the dynamic medium term growth rate of GDP, provided that the underlying factors that determine it (labor productivity, hours worked per employee and so on) will continue in the future to grow at the same rate.

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