Measures of the Output Gap in the Euro-Zone: An Empirical Assessment of Selected Methods

Chagny, Odile; Döpke, Jörg

doi:10.3790/vjh.70.3.310

Cited by 31 publications

(15 citation statements)

References 39 publications

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“…An alternative definition of potential GDP is the level of output that is achievable given the existing capital stock and labor input if the economy were neither in expansion nor in recession. It is therefore clear that the potential GDP and the output gap are key variables for macroeconomic policies; however, employing them in the decision making process has been troublesome due to both unreliable estimation models and varying intensities of the fluctuations of other macroeconomic variables [12]. Other authors define potential GDP as the maximum output that an economy could sustain without generating inflationary pressures [13].…”

Section: Methodsmentioning

confidence: 99%

Estimating Potential GDP for the Romanian Economy and Assessing the Sustainability of Economic Growth: A Multivariate Filter Approach

et al. 2015

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In the current context of economic recovery and rebalancing, the necessity of modelling and estimating the potential output and output gap emerges in order to assess the quality and sustainability of economic growth, the monetary and fiscal policies, as well as the impact of business cycles. Despite the importance of potential GDP and the output gap, there are difficulties in reliably estimating them, as many of the models proposed in the economic literature are calibrated for developed economies and are based on complex macroeconomic relationships and a long history of robust data, while emerging economies exhibit high volatility. The object of this study is to develop a model in order to estimate the potential GDP and output gap and to assess the sustainability of projected growth using a multivariate filter approach. This trend estimation technique is the newest approach proposed by the economic literature and has gained wide acceptance with researchers and practitioners alike, while also being used by the IMF for Romania. The paper will be structured as follows. We first discuss the theoretical background of the model. The second section focuses on an analysis of the Romanian economy for the 1995-2013 time frame, while also providing a forecast for 2014-2017 and an assessment of the sustainability of Romania's economic growth. The third section sums up the results and concludes. OPEN ACCESSSustainability 2015, 7 3339

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Section: Methodsmentioning

confidence: 99%

Estimating Potential GDP for the Romanian Economy and Assessing the Sustainability of Economic Growth: A Multivariate Filter Approach

et al. 2015

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“…Capacity output is an unobservable, and therefore a theoretical and, at the same time, a politically sensitive variable; as a consequence, there are various methodologies to approximate it, none of which, however, is unequivocally accepted. These methodologies can be classified into three broad categories (for detailed reviews see Claus et al , 2000; Chagny and Döpke, 2001). The first and perhaps the most direct of all is based on surveys which are conducted in regular time intervals.…”

Section: Introductionmentioning

confidence: 99%

A New Method for the Estimation of Capacity Utilization: Theory and Empirical Evidence From 14 Eu Countries

Dergiades¹,

Tsoulfidis²

2007

Bulletin of Econ Res

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In this paper, we develop a new and at the same time simple method of obtaining a measure of the rate of capacity utilization (CU) which makes use of the structural vector autoregression (SVAR) system of equation estimating technique with long-run restrictions. The measure of CU that we derive for each of 14 EU countries replicates to a great extent the European Commission's Directorate General for Economic and Financial Affairs (ECFIN) measure. On closer examination we find that the in-sample explanatory content with respect to the inflation rate of the SVAR measure exceeds more often than not that of the ECFIN's measure; however, the out-ofsample forecasting performance of the two models is approximately equivalent.

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“…The sign of the output gap on the different measures seems to be systematically related, suggesting that the methods are at least measuring a related concept. Chagny and Dopke (2001) examined Output Gap in the Euro-Zone and provided estimates of output gap in Euro Zone by using different methods including Structural VAR. the results show the methods imply different turning points and the estimated level of the output gap differs greatly.…”

Section: Literature Reviewmentioning

confidence: 99%

Estimation and Analysis of Output Gap: An Application of Structural Vector Autoregression and Hodrick-Prescott-Fmethods

Khavari¹,

Mirjalili²

2012

American Journal of Economics and Business Administration

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In this study we examined output gap in the Iranian economy. The main question of the study is that how much is seasonal output gap in Iranian Economy and which factor affects gap variation. The other question is that whether using HP-F as a statistical based method for estimating output gap, provide different result than using SVAR as theory based method. Accordingly the aim of study is to estimate potential output and thus output gap using two method and analysis of the result. We used two methods In some years, actual output is more than potential output, that is, output gap is positive and so this situation can be an important reason for inflation in that period and policy maker must do plans and policies for control of inflation and in some years, actual output is less than potential output and this means output gap was negative. This situation is a reason for unemployment in these years and therefore policy makers must do expansionary policies.

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Measures of the Output Gap in the Euro-Zone: An Empirical Assessment of Selected Methods

Cited by 31 publications

References 39 publications

Estimating Potential GDP for the Romanian Economy and Assessing the Sustainability of Economic Growth: A Multivariate Filter Approach

Estimating Potential GDP for the Romanian Economy and Assessing the Sustainability of Economic Growth: A Multivariate Filter Approach

A New Method for the Estimation of Capacity Utilization: Theory and Empirical Evidence From 14 Eu Countries

Estimation and Analysis of Output Gap: An Application of Structural Vector Autoregression and Hodrick-Prescott-Fmethods

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