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The use of cyclical indicators in estimating the output gap in Japan

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  • Jane Haltmaier
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    Abstract

    The paper uses capital and labor utilization rates to derive estimates of the Japanese output gap and potential output. Two techniques are used. The first uses the cyclical indicators to adjust potential output estimates derived from a Hodrick-Prescott filter over the most recent period when such estimates are generally considered to be unreliable. The second estimates equilibrium levels of the cyclical indicators and uses an Okun's Law-type relationship to derive output gaps and potential output. The second method is also applied to the components of potential output to derive a third estimate. These methods suggest that the current Japanese output gap is considerably larger than a simple Hodrick-Prescott filter would suggest.

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    File URL: http://www.federalreserve.gov/pubs/ifdp/2001/701/default.htm
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    File URL: http://www.federalreserve.gov/pubs/ifdp/2001/701/ifdp701.pdf
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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 701.

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    Date of creation: 2001
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    Handle: RePEc:fip:fedgif:701

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    Related research

    Keywords: Economic development - Japan;

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    Cited by:
    1. Daniel Leigh, 2005. "Estimating the Revealed Inflation Target: An Application to U.S. Monetary Policy," Computing in Economics and Finance 2005 177, Society for Computational Economics.
    2. Daniel Leigh, 2005. "Estimating the Implicit Inflation Target," IMF Working Papers 05/77, International Monetary Fund.
    3. David E. Giles & Chad N. Stroomer, 2004. "Identifying the Cycle of a Macroeconomic Time-Series Using Fuzzy Filtering," Econometrics Working Papers 0406, Department of Economics, University of Victoria.
    4. Valadkhani, Abbas, 2006. "Unemployment Conundrum in Iran," Economics Working Papers wp06-15, School of Economics, University of Wollongong, NSW, Australia.
    5. Abbas Valadkhani & Mohammad Alauddin, 2003. "Demand for M2 in Developing Countries: An Empirical Panel Investigation," School of Economics and Finance Discussion Papers and Working Papers Series 158, School of Economics and Finance, Queensland University of Technology.
    6. Hafer, R.W. & Haslag, Joseph H. & Jones, Garett, 2007. "On money and output: Is money redundant?," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 945-954, April.
    7. Gonzalo Llosa & Shirley Miller, 2005. "Using additional information in estimating the output gap in Peru: a multivariate unobserved component approach," Working Papers 2005-004, Banco Central de Reserva del PerĂº.
    8. Gonzalo Llosa/Shirley Miller, 2004. "Using additional information in estimating output gap in Peru: a multivariate unobserved component approach," Econometric Society 2004 Latin American Meetings 243, Econometric Society.

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