Potential Growth of the Spanish Economy

32 Pages Posted: 19 Feb 2016

See all articles by Pilar Cuadrado

Pilar Cuadrado

Banco de España

Enrique Moral-Benito

Banco de España; Universidad Carlos III de Madrid

Date Written: February 19, 2016


This paper presents an estimate of the Spanish economy’s potential growth. This estimate is based on a production function methodology that includes certain refinements on previous versions and generates less procyclical potential output growth estimates than those traditionally considered in the literature. As a result, the (positive) output gap estimated in expansions is higher and that estimated in recessions is lower. According to these results, given the available population projections and under the assumption that total factor productivity (TFP) and structural unemployment will behave in line with historical patterns, the Spanish economy’s potential growth is expected to recover gradually over the coming years but, in line with projections by international organisations, to lower rates than those in the expansion period. However, per capita growth rates fully recover to the pre-crisis levels, which highlights the importance of population projections in shaping the Spanish potential growth.

Keywords: potential growth, output gap, Spain

JEL Classification: E23, E32, E13, O47, O52

Suggested Citation

Cuadrado, Pilar and Moral-Benito, Enrique, Potential Growth of the Spanish Economy (February 19, 2016). Banco de Espana Occasional Paper No. 1603. Available at SSRN: https://ssrn.com/abstract=2734653 or http://dx.doi.org/10.2139/ssrn.2734653

Pilar Cuadrado (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014

HOME PAGE: http://www.bde.es

Enrique Moral-Benito

Banco de España ( email )

Alcala 50
Madrid 28014

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903

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