Alternative Methods of Estimating Potential Output and Output Gap: An Application to Sweden

34 Pages Posted: 16 Feb 2004

See all articles by Valerie Cerra

Valerie Cerra

International Monetary Fund (IMF)

Sweta C. Saxena

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: March 2000

Abstract

This paper reviews a number of different methods that can be used to estimate potential output and the output gap. Measures of potential output and the output gap are useful to help identify the scope for sustainable noninflationary growth and to allow an assessment of the stance of macroeconomic policies. The paper then compares results from some of these methods to the case of Sweden, showing the range of estimates.

Keywords: Sweden, business cycle, output gap, potential output, detrending, production function, vector autoregression, unobserved components models

JEL Classification: E32, C22, C32

Suggested Citation

Cerra, Valerie and Saxena, Sweta Chaman, Alternative Methods of Estimating Potential Output and Output Gap: An Application to Sweden (March 2000). IMF Working Paper No. 00/59, Available at SSRN: https://ssrn.com/abstract=500802 or http://dx.doi.org/10.2139/ssrn.500802

Valerie Cerra

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8596 (Phone)

Sweta Chaman Saxena (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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