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The Utilization-Adjusted Output Gap

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  • Nienke Oomes
  • Oksana Dynnikova

Abstract

This paper estimates the output gap in Russia using a utilization-adjusted production function approach, which we argue is preferable to traditional output gap methods. The approach amounts to (1) using available surveys to estimate the "natural rates" of capacity and labor utilization above which inflation begins to accelerate; (2) estimating a production function with utilization-adjusted capital and labor inputs; and (3) defining potential output as the level of output obtained when both capital and labor are at their estimated natural rates. The results suggest that the output gap in Russia was negative between 1999 and 2003, but may have recently become positive, thus contributing to inflationary pressures.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/68.

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Length: 46
Date of creation: 01 Mar 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/68

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Related research

Keywords: Labor mobility; Labor markets; capacity utilization; survey; surveys; equation; sample size; arithmetic; average capacity; sample bias; average capacity utilization; statistics; correlation; confidence interval; statistical methods; cost of capital; linear trend; statistical method; samples; sample design; time series; random sample; sampling; investment growth; standard error; graphical analysis; horizontal axis; scatter plot; autocorrelation; normal distribution; rate of change; probability; vector autoregression; extrapolation; investors; counting; equations; foreign currency;

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References

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  1. Oomes, Nienke & Ohnsorge, Franziska, 2005. "Money demand and inflation in dollarized economies: The case of Russia," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 462-483, September.
  2. Niek Nahuis, 2003. "An alternative demand indicator: the 'non-accelerating inflation rate of capacity utilization'," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(11), pages 1339-1344.
  3. Franz, Wolfgang & Gordon, Robert J, 1993. "German and American Wage and Price Dynamics: Differences and Common Themes," CEPR Discussion Papers, C.E.P.R. Discussion Papers 777, C.E.P.R. Discussion Papers.
  4. Franziska Ohnsorge & Nienke Oomes, 2005. "Money Demand and Inflation in Dollarized Economies," IMF Working Papers 05/144, International Monetary Fund.
  5. Andrienko, Yuri & Guriev, Sergei, 2003. "Determinants of Interregional Mobility in Russia: Evidence from Panel Data," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3835, C.E.P.R. Discussion Papers.
  6. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 78(3), pages 402-17, June.
  7. Mark Bils & Jang-Ok Cho, 1993. "Cyclical factor utilization," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 79, Federal Reserve Bank of Minneapolis.
  8. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band Pass Filter," NBER Working Papers 7257, National Bureau of Economic Research, Inc.
  9. Craig Burnside & Martin Eichenbaum, 1994. "Factor Hoarding and the Propagation of Business Cycles Shocks," NBER Working Papers 4675, National Bureau of Economic Research, Inc.
  10. Irina Dolinskaya & Irina Tytell, 2001. "Explaining Russia's Output Collapse," IMF Working Papers 01/16, International Monetary Fund.
  11. Norman Morin & John J Stevens, 2005. "Diverging Measures of Capacity Utilization: An Explanation," Business Economics, Palgrave Macmillan, vol. 40(4), pages 46-54, October.
  12. Andreas Billmeier, 2004. "Ghostbusting," IMF Working Papers 04/146, International Monetary Fund.
  13. Norman Morin & John Stevens, 2004. "Estimating capacity utilization from survey data," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2004-49, Board of Governors of the Federal Reserve System (U.S.).
  14. Baxter, Marianne & Farr, Dorsey D., 2005. "Variable capital utilization and international business cycles," Journal of International Economics, Elsevier, Elsevier, vol. 65(2), pages 335-347, March.
  15. Carol Corrado & Joe Mattey, 1997. "Capacity Utilization," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(1), pages 151-167, Winter.
  16. Kenneth M. Emery & Chih-Ping Chang, 1997. "Is there a stable relationship between capacity utilization and inflation?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Q I, pages 14-20.
  17. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(1), pages 33-49, Winter.
  18. Goohoon Kwon & Antonio Spilimbergo, 2005. "Russia's Regions," IMF Working Papers 05/185, International Monetary Fund.
  19. S. Aukutsionek., 2003. "Productive Capacities of Russian Enterprises," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
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Citations

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Cited by:
  1. Voskoboynikov, Ilya B. & Timmer, Marcel, 2013. "Is Mining Fuelling Long-run Growth in Russia? Industry Productivity Growth Trends since 1995," GGDC Research Memorandum, Groningen Growth and Development Centre, University of Groningen GD-137, Groningen Growth and Development Centre, University of Groningen.
  2. Antonio Spilimbergo, 2005. "Measuring the Performance of Fiscal Policy in Russia," IMF Working Papers 05/241, International Monetary Fund.
  3. Michaelides, Panayotis & Milios, John, 2009. "TFP change, output gap and inflation in the Russian Federation (1994-2006)," Journal of Economics and Business, Elsevier, Elsevier, vol. 61(4), pages 339-352, July.
  4. Eteri Kvintradze, 2010. "Russia's Output Collapse and Recovery," IMF Working Papers 10/89, International Monetary Fund.
  5. Aleksejs Meļihovs & Anna Zasova, 2009. "Assessment of the natural rate of unemployment and capacity utilisation in Latvia," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, Baltic International Centre for Economic Policy Studies, vol. 9(2), pages 25-46, December.
  6. Garbis Iradian, 2007. "Rapid Growth in Transition Economies," IMF Working Papers 07/164, International Monetary Fund.
  7. Garbis Iradian & Thomas I. Palley & Julia Wörz, 2007. "Monthly Report No. 3/2007," wiiw Monthly Reports, The Vienna Institute for International Economic Studies, wiiw 2007-03, The Vienna Institute for International Economic Studies, wiiw.
  8. International Monetary Fund, 2010. "Estimates of the Output Gap in Armenia with Applications to Monetary and Fiscal Policy," IMF Working Papers 10/197, International Monetary Fund.

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