Estimating Sri Lanka's Potential Output
17 Pages Posted: 10 Apr 2014
Date Written: March 2014
In this paper we present various techniques to estimate Sri Lanka’s potential output and output gap, including statistical and model-based approaches. Compared to conventional statistical filters that rely exclusively on information in a single series, the model-based approaches allow potential output estimates to incorporate information contained in observable data series including inflation, actual output, unemployment and capacity utilization. The estimation results suggest that Sri Lanka’s potential output has risen slightly in the last few years.
Keywords: Economic growth, Sri Lanka, Production, Business cycles, Economic models, Potential Output, Output Gap, Multivariate Filter, Inflation Expectations, Capacity Utilization, Unemployment, unemployment rate, equilibrium unemployment, equilibrium unemployment rate, nairu, inflation rate, recession, inflation objective, price level, inflation equation, aggregate demand, rate of inflation, lower inflation, inflation targeting, macroeconomic stability, rising inflation, non-accelerating inflation rate of unemployment, increase in inflation
JEL Classification: C32, C53, E31
Suggested Citation: Suggested Citation