European Economy. Occasional Papers
European Commission
Impact of the current economic and financial crisis on potential output 
[2 MB]
(European Economy. Occasional Papers. 49. June 2009.
Brussels. PDF. 87pp. Tab. Graph. Free.)
KC-AH-09-049-EN-C ISBN: 978-92-79-11263-8 ISSN: 1725-3195
Summary for non-specialists [90 KB] 
The crisis is expected to have a large negative impact on the productive capacities of the EU – so-called potential output – in the short-run and the prospect of a prolonged period of slow potential growth as economies adjust to their post-crisis rates.
While this is likely to cause material long-lasting losses in potential output levels, there is also a risk that the current crisis may prevent potential growth from returning to pre-crisis rates in the long run, unless adequate policies are promptly implemented. Besides demand-enhancing measures, comprehensive supply-side policies aimed at strengthening the growth potential need to be implemented promptly. Governments also need to avoid the policy mistakes observed in past crises, especially measures which can severely harm potential output over the medium to long term.
JEL classification:O40
doi:10.2765/44883
[90 KB]
The crisis is expected to have a large negative impact on the productive capacities of the EU – so-called potential output – in the short-run and the prospect of a prolonged period of slow potential growth as economies adjust to their post-crisis rates.
While this is likely to cause material long-lasting losses in potential output levels, there is also a risk that the current crisis may prevent potential growth from returning to pre-crisis rates in the long run, unless adequate policies are promptly implemented. Besides demand-enhancing measures, comprehensive supply-side policies aimed at strengthening the growth potential need to be implemented promptly. Governments also need to avoid the policy mistakes observed in past crises, especially measures which can severely harm potential output over the medium to long term.
JEL classification:O40
doi:10.2765/44883
Last update: 14/02/2011 | Top