Alternative Methods of Estimating Potential Output and the Output Gap: An Application to Sweden

March 1, 2000

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

This 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.

Subject: Inflation, Labor, Output gap, Potential output, Prices, Production, Unemployment, Unemployment rate

Keywords: Business Cycles, constructed output gap, demand shock, Detrending, economic theory, HP filter, Inflation, Output Gap, output gap estimate, Potential Output, price level, production function, production function approach, Sweden, Unemployment, Unemployment rate, Unobserved Components Models, Vector Autoregression, WP

Pages:
33
Volume:
2000
DOI:
https://doi.org/10.5089/9781451847932.001
Issue:
059
Series:
Working Paper No. 2000/059
Stock No:
WPIEA0592000
ISBN:
9781451847932
ISSN:
1018-5941

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Notes

Sweta Chaman Saxena is from the University of Pittsburgh.

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