The demand effects - to the extent that they are directly related to the productivity shock likely reflect the more favorable investment opportunities, the effect of expected profitability on equity prices and hence household wealth and consumption, and the effect of the increase in expected future 3  BIS Review 48/2000  labor income on current consumption.
Demand, it appears, received an additional boost over this period from a run-up in equity prices that the higher productivity growth alone could not fully account for. The balance between supply and demand can be inferred from movements in utilization rates, specifically in the unemployment rate. When actual output is expanding at the same pace as potential, the unemployment rate will be stable.