Potential Output and Output Gap in Central America, Panama and Dominican Republic

Author/Editor: Christian A Johnson
Publication Date: June 12, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: Potential Output is a key factor for debt sustaintability analysis and for developing strategies for growth, but unfortunately it is an unobservable variable. Using three methodologies (production function, switching, and state-space), this paper computes potential output for CAPDR countries using annual data. Main findings are: i) CAPDR potential growth is about 4.4 percent while output gap volatility is about 1.9 percent; ii) The highest-potential growth country is Panama (6.5 percent) while the lowest-growth country is El Salvador (2.6 percent); iii) CAPDR business cycle is about eigth years.
Series: Working Paper No. 13/145
Subject(s): Economic growth | Panama | Dominican Republic | Central America | Production | Business cycles | Economic models | Cross country analysis

Publication Date: June 12, 2013
ISBN/ISSN: 9781484322208/1018-5941 Format: Paper
Stock No: WPIEA2013145 Pages: 42
US$18.00 (Academic Rate:
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