The Impact of COVID on Potential Output

2021-09 | March 3, 2021

The level of potential output is likely to be subdued post-COVID relative to its previous estimates. Most clearly, capital input and full-employment labor will both be lower than they previously were. Quantitatively, however, these effects appear relatively modest. In the long run, labor scarring could lead to lower levels of employment, but the slow pre-recession pace of GDP growth is unlikely to be substantially affected.

Article Citation

Li, Huiyu, and John G. Fernald. 2021. “The Impact of COVID on Potential Output,” Federal Reserve Bank of San Francisco Working Paper 2021-09. Available at https://doi.org/10.24148/wp2021-09

About the Authors
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John G. Fernald is a senior research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco, and a professor of economics at INSEAD. Learn more about John G. Fernald
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Huiyu Li is a research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Huiyu Li