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Potential output and the output gap in Estonia - a macro model based evalutaion

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  • Rasmus Kattai

Abstract

There have been several data revisions to the output statistics in Estonia during the past six years as methodologies have been harmonised. These changes are significant enough to require corrections to the earlier understanding of Estonia's potential economic growth rate. In this paper the latest data vintage from 2009 is used to estimate Estonia's potential output growth and output gap. The production function approach that has been used shows that the gap varies quite extensively, ranging from -8% in 1999 to +8% in 2007, while the average potential growth rate in 1997-2009 was around 6%. The macro model simulations expect the potential growth rate to fall in the future. The fall in the marginal productivity of production inputs makes growth slow to about 4-5% in the next five years, if there are no additional shocks to the economy

Suggested Citation

  • Rasmus Kattai, 2010. "Potential output and the output gap in Estonia - a macro model based evalutaion," Bank of Estonia Working Papers wp2010-03, Bank of Estonia, revised 11 Feb 2010.
    • Handle: RePEc:eea:boewps:wp2010-03
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    References listed on IDEAS

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    Cited by:

    1. International Monetary Fund, 2015. "Republic of Estonia: Selected Issues," IMF Staff Country Reports 2015/337, International Monetary Fund.
    2. Robert Price & Andreas Wörgötter, 2011. "Estonia: Making the Most of Globalisation," OECD Economics Department Working Papers 876, OECD Publishing.

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    More about this item

    Keywords

    potential output; potential growth; output gap;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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