The Use of Cyclical Indicators in Estimating the Output Gap in Japan

30 Pages Posted: 7 Jun 2001

See all articles by Jane Haltmaier

Jane Haltmaier

Board of Governors of the Federal Reserve System

Date Written: April 2001

Abstract

The paper uses capital and labor utilization rates to derive estimates of the Japanese output gap and potential output. Two techniques are used. The first uses the cyclical indicators to adjust potential output estimates derived from a Hodrick- Prescott filter over the most recent period when such estimates are generally considered to be unreliable. The second estimates equilibrium levels of the cyclical indicators and uses an Okun's Law-type relationship to derive output gaps and potential output. The second method is also applied to the components of potential output to derive a third estimate. These methods suggest that the current Japanese output gap is considerably larger than a simple Hodrick-Prescott filter would suggest.

Keywords: Potential Output, Output Gap

JEL Classification: F0, N1, and 04

Suggested Citation

Haltmaier, Jane, The Use of Cyclical Indicators in Estimating the Output Gap in Japan (April 2001). International Finance Discussion Paper No. 701. Available at SSRN: https://ssrn.com/abstract=269260 or http://dx.doi.org/10.2139/ssrn.269260

Jane Haltmaier (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2374 (Phone)
202-736-5638 (Fax)

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