Steady-state growth

We compute steady-state economic growth—defined as the rate of growth that the economy would converge to in the absence of new shocks. As we show, this rate can be computed in real-time by means of a parsimonious time-varying parameter (TVP) vector autoregression model. Our procedure offers a relatively agnostic estimation of benchmark equilibrium growth rates. Estimates show that the steady-state gross domestic product growth rate in the case of the United States has declined from just above 3% per year in the 1990s to 2.4% at present. Results for other six advanced economies and the euro area indicate that the steady-state growth rate, which is consistent with stable inflation and financial conditions, has been relatively stable since 2010 in most cases in spite of a recent slowdown in actual GDP growth rates. In contrast, per capita steady-state growth rates during the last decade were typically lower than in the 1990s.