A State-Space Model to Estimate Potential Growth in the Industrialized Countries.

Summary This paper proposes new estimates of potential growth for 5 major industrialized countries. We use a state-space approach to obtain joint estimates of potential growth and the natural interest rates. The model is a reduced-form of a partial equilibrium model with a Phillips curve and an IS curve. In addition to the usual determinants of prices and business fluctuations, we consider financial variables as a determinant of the business cycle.