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Estimating potential output using business survey data in a svar framework

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  • Tatiana Cesaroni

    (Ministry of Economy and Finance)

Abstract

Potential output and the related concept of output gap play a central role in the macroeconomic policy interventions and evaluations. In particular, the output gap, defined as the difference between actual and potential output, conveys useful information on the cyclical position of a given economy. This paper proposes estimates of the Italian potential output based on a structural VAR model using data coming from business surveys. This kind of data, given their cyclical profile, are particularly useful for detrending purposes, as they allow to include information concerning the business cycle activity. The ability of the cyclical GDP component obtained with the SVAR decomposition to forecast inflation and to detect business cycle turning points over the expansion and recession phases is then performed.

Suggested Citation

  • Tatiana Cesaroni, 2010. "Estimating potential output using business survey data in a svar framework," Economics Bulletin, AccessEcon, vol. 30(3), pages 2249-2258.
    • Handle: RePEc:ebl:ecbull:eb-08e30021
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    References listed on IDEAS

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    1. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
    2. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    3. Athanasios Orphanides & Simon van Norden, 2002. "The Unreliability of Output-Gap Estimates in Real Time," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 569-583, November.
    4. Iris Claus, 2003. "Estimating potential output for New Zealand," Applied Economics, Taylor & Francis Journals, vol. 35(7), pages 751-760.
    5. Peter K. Clark, 1987. "The Cyclical Component of U. S. Economic Activity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(4), pages 797-814.
    6. Pierre St-Amant & Simon van Norden, 1997. "Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada," Technical Reports 79, Bank of Canada.
    7. Tatiana Cesaroni, 2011. "The cyclical behavior of the Italian business survey data," Empirical Economics, Springer, vol. 41(3), pages 747-768, December.
    8. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, March.
    9. Simon van Norden, 1995. "Why Is It So Hard to Measure the Current Output Gap?," Macroeconomics 9506001, University Library of Munich, Germany.
    10. A'Hearn, Brian & Woitek, Ulrich, 2001. "More international evidence on the historical properties of business cycles," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 321-346, April.
    11. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
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    Cited by:

    1. Jérôme Creel & Maurizio Iacopetta, 2015. "Macroeconomic Policy and potential growth," Documents de Travail de l'OFCE 2015-15, Observatoire Francais des Conjonctures Economiques (OFCE).
    2. Mahmood-ul-Hasan Khan, 2008. "Short Run Effects of an Unanticipated Change in Monetary Policy: Interpreting Macroeconomic Dynamics in Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 4, pages 1-30.
    3. repec:hal:spmain:info:hdl:2441/3d1rt55ran82d86guhaponket6 is not listed on IDEAS
    4. Roberta De Santis & Tatiana Cesaroni, 2016. "Current Account ‘Core–Periphery Dualism’ in the EMU," The World Economy, Wiley Blackwell, vol. 39(10), pages 1514-1538, October.
    5. S. Adnan H. A. S. Bukhari & Safdar Ullah Khan, 2008. "Estimating Output Gap for Pakistan Economy: Structural and Statistical Approaches," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 4, pages 31-60.
    6. Tatiana Cesaroni & Stefano Iezzi, 2017. "The Predictive Content of Business Survey Indicators: Evidence from SIGE," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 13(1), pages 75-104, May.
    7. Cesaroni, Tatiana & De Santis, Roberta, 2015. "Current Account �Core-Periphery Dualism� in the EMU," CEPS Papers 10317, Centre for European Policy Studies.

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    More about this item

    Keywords

    output gap; business survey data; structural VAR models; forecast ability;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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