Cover; Contents; I. Introduction; II. Estimating Potential Growth from a Small Macro Model; A. The Model; B. Potential Growth Estimate; C. Adverse Growth Scenarios; Figures; 1. Potential Growth Estimate; 2. Contributions to Potential Growth; 3. Potential Growth Scenarios; III. Growth Diagnostic via Cross-Country Comparison; A. Identifying Impediments; 4. Average Investment-to-GDP (2000-2009); 5. Hindrance to Investment; 6. Infrastructure; 7. Crop Yields; 8. Deviations from Predicted Public Spending on Education; 9. Herfindahl Index of Export Diversification; B. Quantifying Growth Dividends
10. Potential Growth with Investment BoostIV. Conclusion; Appendix; A. Data; B. Parameters; References
Summary
This paper proposes a framework to analyze long-term potential growth that combines a simple quantitative model with an investigative approach of "growth diagnostics". The framework is used to forecast potential growth for Cambodia, and to conduct simulations about the main drivers of growth in that country. The main result is that Cambodia compares less favorably against other lower-income Asian economies in terms of its investment rate, which in turn is constrained by the poor quality of its infrastructure. Bridging this gap can lift Cambodia's potential growth by more than one percentage point
