Inflation-Adjusted Potential Output

Posted: 30 Sep 1996

See all articles by Jane Haltmaier

Jane Haltmaier

Board of Governors of the Federal Reserve System

Date Written: August 1996

Abstract

This paper estimates potential output for seven countries using a multivariate version of the Hodrick-Prescott filter in which observations on inflation are used to help separate trend from cyclical movements in output. The potential series are estimated first on an aggregate basis and then by disaggregating output into three major components: labor productivity, the employment-population ratio and population. Potential levels of productivity and the employment-population ratios are calculated using the multivariate filter and combined with actual population to derive an alternative, "disaggregated" estimate of potential. The method is then applied to forecasting potential growth.

JEL Classification: E32, O47

Suggested Citation

Haltmaier, Jane, Inflation-Adjusted Potential Output (August 1996). Board of Governors of the Federal Reserve System International Finance Disc. Papers 561. Available at SSRN: https://ssrn.com/abstract=3358

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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