A Fresh Look at Potential Output in Central, Eastern, and Southeastern European Countries

By Jiri Podpiera, Faezeh Raei, Ara Stepanyan

February 14, 2017

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Jiri Podpiera, Faezeh Raei, and Ara Stepanyan. A Fresh Look at Potential Output in Central, Eastern, and Southeastern European Countries, (USA: International Monetary Fund, 2017) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Was the postcrisis growth slowdown in Central, Eastern and Southeastern Europe (CESEE) structural or cyclical? We use three different methods—production function approach, basic multivariate filter, and multivariate filter with financial frictions—to evaluate potential growth and output gaps for 18 CESEE countries during 2000-15. Our findings suggest that potential growth weakened significantly after the crisis across most countries in the region. This decline appears to be largely due to stagnant productivity and weaker capital accumulation, which were associated with common external factors, including trading partners’ slow potential growth, but also decline in global trade and stalled expansion of global value chains. Our estimates suggest that output gaps in 2015 were largely closed in many countries in the region.

Subject: Capacity utilization, Inflation, Output gap, Potential output, Prices, Production, Total factor productivity

Keywords: Baltics, Capacity utilization, Central and Eastern Europe, CESEE, CESEE economy, Core inflation, Emerging Markets, Global, Inflation, MVF FIN, Output gap, Output gap amplitude, Output gap estimate, Potential output, Total factor productivity, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/037
Stock No:

WPIEA2017037
ISBN:

9781475578980
ISSN:

1018-5941

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