Growing differently? Financial cycles, austerity, and competitiveness in growth models since the Global Financial Crisis

Figures & data

Table 1. Macroeconomic performance, 2000-2007 and 2008-2017.

	(1)		(2)		(3)		(4)
	Real GNI growth (%), average		GNI growth contribution of current account (%), average		GNI growth contribution of domestic income (%), average		Current account (%GNI), average
	2000-2007	2008-2017	2000-2007	2008-2017	2000-2007	2008-2017	2000-2007	2008-2017
AUS	3.14	2.85	−0.44	0.40	3.57	2.46	−5.53	−3.90
NZL	3.41	2.50	−0.40	0.36	3.81	2.13	−4.56	−3.46
CAN	3.07	1.64	0.14	−0.41	2.93	2.05	1.75	−2.84
USA	2.78	1.52	−0.37	0.22	3.15	1.29	−4.69	−2.62
IRL	5.32	1.09	−1.78	1.02	7.14	0.074	−2.91	−1.61
GBR	2.83	1.00	−0.20	−0.021	3.03	1.02	−2.46	−4.11
DNK	2.10	0.93	0.032	0.72	2.07	0.22	2.61	6.50
FIN	3.67	0.099	−0.058	−0.41	3.72	0.51	6.12	−0.44
ISL	4.54	2.32	−1.43	2.52	5.98	−0.20	−10.7	−3.35
NOR	2.50	1.56	1.22	−0.56	1.28	2.12	14.0	10.2
SWE	3.66	1.43	0.72	−0.46	2.93	1.89	6.13	5.04
BEL	2.33	1.09	−0.54	−0.023	3.09	1.11	2.69	0.53
NLD	2.10	0.92	0.42	0.54	1.68	0.37	4.74	7.98
LUX	4.20	−1.29	0.88	−0.39	3.32	−0.90	11.1	8.53
AUT	2.62	0.95	0.81	−0.16	1.81	1.11	1.70	2.36
DEU	1.90	1.31	1.09	0.20	0.80	1.10	2.85	6.78
CHE	1.84	1.58	0.33	−0.15	1.51	1.73	11.1	8.90
FRA	2.15	0.83	−0.44	−0.024	2.60	0.86	0.60	−0.85
GRC	3.60	−2.55	−1.45	1.49	5.05	−4.04	−8.17	−5.68
ITA	1.52	−0.45	−0.32	0.42	1.84	−0.87	−0.55	−0.21
PRT	1.18	0.054	−0.27	1.09	1.45	−1.04	−9.66	−3.91
ESP	3.53	0.54	−1.04	1.21	4.57	−0.67	−6.11	−1.35
CZE	3.91	1.57	−0.50	0.67	4.41	0.90	−4.34	−0.92
HUN	3.63	1.38	−0.19	1.10	3.82	0.28	−7.68	1.22
POL	3.79	3.28	−0.072	0.56	3.86	2.72	−4.19	−3.04
SVK	5.41	2.54	−0.58	0.29	5.99	2.25	−5.52	−2.18
SVN	4.05	0.73	−0.23	1.22	4.28	−0.49	−1.60	2.42
EST	7.19	1.22	−2.34	1.89	9.53	−0.67	−11.2	0.19
LVA	8.27	0.34	−2.59	2.16	10.9	−1.81	−11.2	−1.40
LTU	7.35	1.44	−1.22	1.64	8.57	−0.20	−8.13	−1.42
Total	3.59	1.08	−0.36	0.57	3.95	0.51	−1.46	0.58

Data sources: World Bank, OECD, CSO Ireland; authors’ calculations. See Supplementary Material, Table A1, for further information on the sample and data construction.

Notes: GNI: gross national income. The grey shaded cells indicate an improvement in the current account position compared to the pre-crisis period. Growth contribution of current account were constructed as $\mathrm{GRWT}{\mathrm{H}}_{\mathrm{CONTR}}^{\mathrm{CA}}=(\mathrm{C}{\mathrm{A}}_{\mathrm{t}}-\mathrm{C}{\mathrm{A}}_{\mathrm{t}-1})/\mathrm{GN}{\mathrm{I}}_{\mathrm{t}-1}$ and growth contribution of domestic income as $\mathrm{ }\mathrm{GRWT}{\mathrm{H}}_{\mathrm{CONTR}}^{\mathrm{DI}}=\mathrm{GRWTH}-\mathrm{GRWT}{\mathrm{H}}_{\mathrm{CONTR}}^{\mathrm{CA}}.$

Table 2. Growth contributions of exports and imports, 2000-2007 and 2008-2017.

	GNI growth contribution of exports (%), average		GNI growth contribution of imports (%), average		$\Delta \mathit{GRWT}{H}_{\mathit{CONTR}}^{\hspace{0.17em}\text{EXP}\hspace{0.17em}}>$ $\Delta \mathit{GRWT}{H}_{\mathit{CONTR}}^{\mathit{IMP}}?$
	2000-2007	2008-2017	2000-2007	2008-2017
AUS	0.70	0.93	−1.28	−0.88	NO
NZL	1.14	0.79	−1.61	−1.05	NO
CAN	0.74	0.34	−1.49	−0.74	NO
USA	0.47	0.39	−0.79	−0.37	NO
IRL	8.80	12.9	−8.15	−9.07	YES
GBR	1.20	0.66	−1.43	−0.69	NO
DNK	2.47	1.26	−2.74	−0.99	NO
FIN	2.48	0.17	−2.32	−0.56	NO
ISL	2.21	2.89	−3.24	−0.70	NO
NOR	0.55	0.23	−1.46	−0.70	NO
SWE	2.51	0.93	−1.92	−1.17	NO
BEL	3.31	1.91	−3.00	−2.05	NO
NLD	3.28	2.60	−2.99	−2.05	NO
LUX	13.6	12.0	−10.5	−11.2	NO
AUT	3.11	1.23	−2.45	−1.21	NO
DEU	2.74	1.41	−1.74	−1.34	NO
CHE	2.43	1.61	−1.44	−1.37	NO
FRA	1.12	0.68	−1.33	−0.81	NO
GRC	1.23	0.25	−2.04	0.91	NO
ITA	1.06	0.35	−1.11	−0.10	NO
PRT	1.40	1.53	−1.21	−0.89	NO
ESP	1.25	0.96	−2.11	0.19	NO
CZE	6.60	4.02	−6.27	−3.23	NO
HUN	7.57	4.14	−7.24	−3.09	NO
POL	3.33	2.93	−3.09	−2.32	NO
SVK	8.78	4.14	−8.91	−3.25	NO
SVN	5.58	2.80	−5.21	−1.52	NO
EST	5.63	3.29	−7.70	−2.16	NO
LVA	4.31	2.53	−6.90	−0.58	NO
LTU	5.45	4.31	−6.74	−3.03	NO
Total	3.50	2.47	−3.61	−1.87	NO

Data sources: World Bank, OECD; authors’ calculations. See Supplementary Material, Table A1.

Notes: GNI: gross national income. Growth contribution of exports and imports are constructed as $\mathrm{GRWT}{\mathrm{H}}_{\mathrm{CONTR}}^{\mathrm{EXP}}=(\mathrm{EX}{\mathrm{P}}_{\mathrm{t}}-{\mathrm{EXP}}_{\mathrm{t}-1})/\mathrm{GN}{\mathrm{I}}_{\mathrm{t}-1}$ and $\mathrm{GRWT}{\mathrm{H}}_{\mathrm{CONTR}}^{\mathrm{IMP}}=-(\mathrm{IM}{\mathrm{P}}_{\mathrm{t}}-{\mathrm{IMP}}_{\mathrm{t}-1})/\mathrm{GN}{\mathrm{I}}_{\mathrm{t}-1}.$ $\mathrm{\Delta }\mathrm{GRWT}{\mathrm{H}}_{\mathrm{CONTR}}$ denotes the change in the growth contribution between the two periods.

Table 3. Overview of key growth drivers.

	Finance	Fiscal policy	Competitiveness
Aggregate demand-component	Private: consumption, (residential) investment	Public: government spending and taxation	Foreign: net exports
Key growth drivers and their proxies	Property prices, household debt	Structural fiscal balance	Price competitiveness: Real effective exchange rate	Non-price competitiveness: Measure of export sophistication

Figure 1. House prices and GNI growth (upper panel), house prices and household debt (lower panel); before and after 2008.

Data sources: OECD, BIS; authors' calculations. See Supplementary material, Table A1, for data definitions and data restrictions.

Figure 2. The financial cycle: change in household debt before and after 2008.

Data sources: OECD, BIS; authors’ calculations. See Supplementary material, Table A1.

Figure 3. Cyclically adjusted fiscal balance (to potential output) and GNI growth, 2000-2007 and 2008-2017.

Data source: IMF; authors’ calculations. See Supplementary material, Table A1.

Figure 4. Growth of real effective exchange rate in manufacturing (REER_MANUF) and average GNI growth rate, before and after 2008.

Data source: OECD; authors’ calculations; See Supplementary material, Table A1.

Figure 5. Export complexity index (ECI) and GNI growth, 2000-2007 and 2008-2017.

Data source: OEC; authors’ calculations. See Supplementary material, Table A1.

Table 4. Multivariate regression.

	Real GNI growth (%), average 2000-2007	Real GNI growth (%), average 2008-2017
HPR	0.016***	0.018**
	(0.000)	(0.015)
FISBAL	0.005	−0.189**
	(0.963)	(0.038)
REERMANU	0.009	0.016
	(0.640)	(0.271)
ECI	0.224	−0.008
	(0.687)	(0.980)
Constant	1.580	0.975**
	(0.117)	(0.024)
Observations	21	28
$R^2$	0.66	0.42

Notes: P-values in parentheses. HPR: growth of real house price index; FISBAL: average cyclically adjusted structural fiscal balance to potential output; REER_MANU: growth in real effective exchange rate based on manufacturing unit labor cost, ECI: average economic complexity index. The reduced sample size is due to missing house price data for most eastern European countries prior to the GFC and missing values of ECI for Iceland and Luxembourg (see Table A1 in the Supplementary material for details).