Potential output is an estimate of the level of gross domestic product attainable when the economy is operating at a high rate of resource use. A summary measure of the economy's productive capacity, potential output plays an important role in the Congressional Budget Office (CBO)'s economic forecast and projection. The author briefly describes the method the CBO uses to estimate and project potential output, outlines some of the advantages and disadvantages of that approach, and describes some of the challenges associated with estimating and projecting potential output. Chief among these is the difficulty of estimating the underlying trends in economic data series that are volatile, subject to structural change, and frequently revised. Those challenges are illustrated using examples based on recent experience with labor force growth, the Phillips curve, and labor productivity growth.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Article provided by Federal Reserve Bank of St. Louis in its journal Review.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Did you know? Each page is provided with a technical contact, in case something is not right with the supplied information. See under "publisher info".