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The Utilization-Adjusted Output Gap: Is the Russian Economy Overheating?


Nienke Oomes


International Monetary Fund (IMF)

Oksana Dynnikova


International Monetary Fund (IMF) - European Department

March 2006

IMF Working Paper No. 06/68

Abstract:     
This paper estimates the output gap in Russia using a utilization-adjusted production function approach, which we argue is preferable to traditional output gap methods. The approach amounts to (1) using available surveys to estimate the 'natural rates' of capacity and labor utilization above which inflation begins to accelerate; (2) estimating a production function with utilization-adjusted capital and labor inputs; and (3) defining potential output as the level of output obtained when both capital and labor are at their estimated natural rates. The results suggest that the output gap in Russia was negative between 1999 and 2003, but may have recently become positive, thus contributing to inflationary pressures.

Number of Pages in PDF File: 46

Keywords: Output gap, capacity utilization, natural rate, Phillips curve, Russia

JEL Classification: D24, E31, E32, P24

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Date posted: April 26, 2006  

Suggested Citation

Oomes, Nienke and Dynnikova, Oksana, The Utilization-Adjusted Output Gap: Is the Russian Economy Overheating? (March 2006). IMF Working Paper, Vol. , pp. 1-46, 2006. Available at SSRN: http://ssrn.com/abstract=898729

Contact Information

Nienke Oomes (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
Oksana Dynnikova
International Monetary Fund (IMF) - European Department ( email )
700 19th Street NW
Washington, DC 20431
United States
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