A Multivariate Filter for Measuring Potential Output and the NAIRU Application to the Czech Republic

March 1, 2004

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 presents a multivariate (MV) methodology for obtaining measures of excess demand that can facilitate discussion of monetary policy issues and improve policy decisions. Using data for the Czech Republic, a growing economy undergoing major structural change, it shows how the use of more information to condition the paths of potential output and the non accelerating inflation rate of unemployment (NAIRU) improves on univariate methods as the Hodrick-Prescott (HP) filter.

Subject: Financial services, Foreign exchange, Inflation, Output gap, Potential output, Prices, Production, Real exchange rates, Real interest rates

Keywords: excess demand, Fiscal Policy, HP estimate, HP filter, HP result, Inflation, Monetary Policy, Output gap, Phillips Curve, Potential output, production function, Real exchange rates, Real interest rates, transition equation, Unemployment, WP

Pages:
31
Volume:
2004
DOI:
https://doi.org/10.5089/9781451846508.001
Issue:
045
Series:
Working Paper No. 2004/045
Stock No:
WPIEA0452004
ISBN:
9781451846508
ISSN:
1018-5941

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