Potential growth is endogenous

Potential growth is often seen as exogenous, equal to the sum of trend productivity gains (which are what they are) and labour force growth (which results from demographics). In the long term, growth is assumed to reach this exogenous level of potential growth. But in reality, potential growth is endogenous. If economic policies or the economic environment stimulate growth, the reaction of companies and households leads to an increase in potential growth (as can be observed in the United States). If, in contrast, growth weakens, potential growth will also weaken due to the reaction of productivity gains and the participation rate (as can be observed in the euro zone). Current growth therefore clearly has an influence on long-term growth, which is an argument for stimulatory policies in the short term to stop growth from falling.