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Estimating Potential Output And The Output Gap For Brazil

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Author Info
Carlos Hamilton Vasconcelos Araujo
Marta Baltar Moreira Areosa
Osmani Teixera de Carvalho Guillén

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Abstract

This paper aims to estimate output gap for Brazilian economy through di.erents methodolies. We use traditional univariate techniques and propose a new semi-estructural methodology that combines HP filtering and the production function approach. In order to compare the di.erent potential output estimates, we use a Phillips curve to predict free price inflation and a rolling forecast experiment as a test of forecast accuracy. Our results shows that the forecasts produced by the Local level and Watson models are even more inaccurate than those generated by the simplest univariate models. The main evidence is that the Beveridge-Nelson methodology outperforms all the models at all forecast horizons.

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Publisher Info
Paper provided by ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics] in its series Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] with number 041.

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Date of creation: 2004
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Handle: RePEc:anp:en2004:041

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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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.:
  1. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001. "One decade of inflation targeting in the world : What do we know and what do we need to know?," Working Papers Central Bank of Chile 101, Central Bank of Chile. [Downloadable!]
    Other versions:
  2. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    Other versions:
  3. Kichian, Maral, 1999. "Measuring Potential Output within a State-Space Framework," Working Papers 99-9, Bank of Canada. [Downloadable!]
  4. 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. [Downloadable!] (restricted)
  5. Tommaso PROIETTI & Alberto MUSSO & Thomas WESTERMANN, 2002. "Estimating Potential Output and the Output Gap for the Euro Area: a Model-Based Production Function Approach," Economics Working Papers ECO2002/09, European University Institute. [Downloadable!]
    Other versions:
  6. St-Amant, P. & van Norden, S., 1997. "Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada," Technical Reports 79, Bank of Canada. [Downloadable!]
  7. Blinder, Alan S, 1997. "Distinguished Lecture on Economics in Government: What Central Bankers Could Learn from Academics--And Vice Versa," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 3-19, Spring. [Downloadable!] (restricted)
  8. Marcelo Kfoury Muinhos & Sergio Afonso Lago Alves, 2003. "Medium-Size Macroeconomic Model for the Brazilian Economy," Working Papers Series 64, Central Bank of Brazil, Research Department. [Downloadable!]
  9. Ehrmann, Michael & Smets, Frank, 2003. "Uncertain potential output: implications for monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1611-1638, July. [Downloadable!] (restricted)
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  10. Athanasios Orphanides & Simon van Norden, 1999. "The Reliability of Output Gap Estimates in Real Time," Macroeconomics 9907006, EconWPA. [Downloadable!]
    Other versions:
  11. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, vol. 18(1), pages 49-75, July. [Downloadable!] (restricted)
  12. Iris Claus, 1999. "Estimating potential output for New Zealand: a structural VAR approach," Reserve Bank of New Zealand Discussion Paper Series DP2000/03, Reserve Bank of New Zealand. [Downloadable!]
  13. Michael F. Bryan & Stephen G. Cecchetti, 2001. "A Note on the Efficient Estimation of Inflation in Brazil," Working Papers Series 11, Central Bank of Brazil, Research Department. [Downloadable!]
  14. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December. [Downloadable!] (restricted)
  15. Valerie Cerra & Sweta Chaman Saxena, 2000. "Alternative Methods of Estimating Potential Output and the Output Gap - An Application to Sweden," IMF Working Papers 00/59, International Monetary Fund.
  16. Joel Bogdanski & Alexandre Antonio Tombini & Sérgio Ribeiro da Costa Werlang, 2000. "Implementing Inflation Targeting in Brazil," Working Papers Series 1, Central Bank of Brazil, Research Department. [Downloadable!]
  17. Sergio Afonso Lago Alves, 2001. "Evaluation of the Central Bank of Brazil Structural Model's Inflation Forecasts in an Inflation Targeting Framework," Working Papers Series 16, Central Bank of Brazil, Research Department. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Elaine Cristina de Piza & Joilson Dias, 2006. "Novo Consenso Macroeconômico E Política Monetária No Brasil: Uma Avaliação Empírica," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 164, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  2. Leandro Nascimento Brito & Elcyon Caiado Rocha Lima, 2008. "Inflação e Nível de Atividade no Brasil: Estimativas via Curva de Phillips," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807211039560, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
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