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Trend TFP Growth in the United States: Forecasts Versus Outcomes

CEPR Discussion Paper No. DP12029

17 Pages Posted: 15 May 2017

See all articles by Nicholas Crafts

Nicholas Crafts

University of Warwick

Terence C. Mills

Loughborough University - Department of Economics

Date Written: May 2017

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 auto-regression. This is fitted using a Kalman-filter methodology. We find that trend TFP growth has declined steadily from 1.5 per cent 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. Techno-optimists should not give best to secular stagnationists simple because recent TFP growth has been weak.

Keywords: productivity slowdown, secular stagnation, TFP growth

JEL Classification: E32, N12, O47

Suggested Citation

Crafts, Nicholas and Mills, Terence C., Trend TFP Growth in the United States: Forecasts Versus Outcomes (May 2017). CEPR Discussion Paper No. DP12029, Available at SSRN: https://ssrn.com/abstract=2968370

Nicholas Crafts (Contact Author)

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

Terence C. Mills

Loughborough University - Department of Economics ( email )

York House
Loughborough LE11 3TU
Great Britain
+44 1509 222703 (Phone)
+44 1509 223910 (Fax)

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