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Potential output and output gap estimation models for the Philippines

Author

Listed:
  • Roberto S. Mariano

    (University of Pennsylvania)

  • Suleyman Ozmucur

    (University of Pennsylvania)

  • Veronica B. Bayangos

    (UBangko Sentral ng Pilipinas)

  • Faith Christian Q. Cacnio

    (Bangko Sentral ng Pilipinas)

  • Marites B. Oliva

    (Bangko Sentral ng Pilipinas)

Abstract

Reliable estimates of the economy’s potential output and output gap are particularly important for inflation targeting and monetary policy setting in the Philippines. This paper examines alternative modeling approaches that can be used to estimate potential output and the output gap in the Philippines. Variations of statistically-based filtering methods, production function approach, and broad-based macroeconomic modeling approach are used to generate estimates of potential output for the Philippines. A contribution of this study in the empirical literature in the Philippines is the introduction of more comprehensive labor market and financial market conditions indices as explicit drivers of potential output. Given competing models for estimating the output gap, the paper also investigates the use of output gap estimates in forecasting inflation. The study also looks into the measurement of total factor productivity in the Philippines using production functions.

Suggested Citation

  • Roberto S. Mariano & Suleyman Ozmucur & Veronica B. Bayangos & Faith Christian Q. Cacnio & Marites B. Oliva, 2018. "Potential output and output gap estimation models for the Philippines," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 55(1 and 2), pages 161-197, June and .
    • Handle: RePEc:phs:prejrn:v:55:y:2018:i:1and2:p:161-197
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    File URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/973/872
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    More about this item

    Keywords

    potential output; output gap; total factor productivity; inflation targeting; Philippines;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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