Determination of Potential Growth Using Panel Techniques

48 Pages Posted: 14 Feb 2005 Last revised: 11 Sep 2018

See all articles by Marcus Kappler

Marcus Kappler

Center for European Economic Research (ZEW)

Date Written: 2004


The aim of this paper is to construct an indicator of potential growth for developed countries using the insights of the theoretical and empirical growth literature. The Pooled Mean Group Estimator of Pesaran, Shin and Smith (1999) that employs a panel data technique is used. This estimator is suited for integrated annual macroeconomic panel data sets to estimate long-run relationships between GDP per capita and its determinants of the underlying cross-section of 12 industrial countries. Since this long-run relationship describes a sort of structural relationship, one can use the fitted model to calculate an indicator of potential growth. The first part of the paper reviews the existing growth literature with a special focus on industrial countries in order to motivate for the used variables in the econometric analysis. The next part explains the concept of panel unit roots and panel cointegration and introduces the underlying empirical approach. Next, empirical results are presented and discussed. Then, the calculation of the potential growth indicator is demonstrated. The last part of this paper concludes.

Keywords: Economic growth, Panel data, unit root, cointegration

JEL Classification: C32, O47, O57

Suggested Citation

Kappler, Marcus, Determination of Potential Growth Using Panel Techniques (2004). ZEW - Centre for European Economic Research Discussion Paper No. 04-069, Available at SSRN: or

Marcus Kappler (Contact Author)

Center for European Economic Research (ZEW) ( email )

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