Potential output usually refers to a yardstick for determining the necessary rate of growth for an economy to remain on a stable growth path without inflation. However, in a deflationary state with possible debt overhang, potential output is not useful in guiding macroeconomic policy. For a small, open economy that relies heavily on exports for growth momentum, growth potential measured on the basis of CES production more effectively captures the problem of escaping from chronic recession. Growth potential summarizes the bottlenecks for growth rather succinctly in light of factor substitution and input-augmenting productivity shocks. Empirical evidence based on various estimation methods suggests different conclusions. While the low inflation environment of recent years contributed to the increase in potential output growth, actual growth potential has shown a downward trend. We have more room to grow without an inflation scare, but we cannot grow due to a lack of demand for factor inputs. The gap between potential output and growth potential actually increases, suggesting that there are serious systematic problems in our economy. Labor inputs have declined in terms of man-hours, and technology contributes increasingly to added value. In short, the so-called "growth without jobs" phenomenon is rapidly becoming reality here.
To help bridge the gap between potential output and growth potential, we need to initiate a massive program of restructuring to promote productivity, especially in the nontradable sectors. As such, the proposed yardstick in this study can be useful to measure the appropriateness of monetary policy for an economy with serious restructuring and polarization. Because of the creative destruction that restructuring entails, a more comprehensive social safety net will have be created to absorb the rising unemployment that will occur in the short term. Without this comprehensive restructuring, the gap will exacerbate the hollowing out of SMEs(Small and Medium-sized Enterprises), and rising social tensions will prevent further growth. The only way to break this vicious cycle is to make the Korean economy more integrated into the world economy through the creation of stronger institutions and expansion of the market.
잠재성장률 및 성장잠재력의 추이와 시사점
|Series Title; No||정책조사보고서 / 2003-09|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Macroeconomics|
|Holding||한국금융연구원; KDI 국제정책대학원|