Alternative Methods of Estimating Potential Output and the Output Gap: An Application to Sweden, Issues 2000-2059This paper reviews a number of different methods that can be used to estimate potential output and the output gap. Measures of potential output and the output gap are useful to help identify the scope for sustainable noninflationary growth and to allow an assessment of the stance of macroeconomic policies. The paper then compares results from some of these methods to the case of Sweden, showing the range of estimates. |
Contents
Introduction | 3 |
Empirical Estimates of Potential Output and the Output Gap | 16 |
Probabilities of permanent and temporary output losses | 22 |
1 other sections not shown
Common terms and phrases
1-state actual unemployment aggregate demand assumed autoregressive process Beveridge-Nelson decomposition bivariate unobserved component Blanchard and Quah business cycle business sector C₁ capital stock Clarida and Gali component of output cyclical component demand shock detrending techniques economic theory equation estimates of potential Estimating Potential Output exogenous Figure growth rates Hodrick-Prescott Filter HP filter identify Kalman filter Levels in logs matrix measure n₁ NAIRU NAWRU nominal shocks Okun's Law Output and Output percent in 1998 Percent of GDP permanent and cyclical permanent and temporary permanent and transitory Phillips curve potential growth production function approach rate of unemployment real exchange rate S₁ Schwarz criterion Staff estimates stochastic trend structural shocks supply shocks Sveriges Riksbank Sweden system unobserved components temporary component total factor productivity trend components trend estimation trend level trend output unemployment rate univariate unobserved component method unobserved components model unobserved variables vector x₁ Y₁