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Figure 2 – The analytical model Policy response and channels of transmission

The analytical model Policy response and channels of transmission

The analytical model Policy response and channels of transmission

Our analytical model follows a growth projection and accounting framework taken from the Organisation for Economic Co-operation and Development (OECD). This approach also has several advantages from the policy analysis perspective, as the model has been designed to examine the economic impact of policies and institutions. We look at potential added value as this allows us to capture the negative effect of the ageing population and to highlight the potential counterbalancing impact of policies to boost potential growth. More specifically, the approach involves an accounting exercise that deconstructs potential added value, in changes, into the contribution from capital deepening (capital per person employed), total factor productivity per person employed (TFP), employment rate ratio, ratio of working-age population to total population, and population growth.

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