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Potential Output in DSGE Models

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Author Info

  • Igor Vetlov

    ()
    (Bank of Lithuania)

  • Tibor Hlédik

    ()
    (Czech National Bank)

  • Magnus Jonsson

    ()
    (Sveriges Riksbank)

  • Henrik Kucsera

    ()
    (Magyar Nemzeti Bank)

  • Massimiliano Pisani

    ()
    (Banca d'Italia)

Abstract

In view of the increasing use of Dynamic Stochastic General Equilibrium (DSGE) models in the macroeconomic projections and the policy process, this paper examines, both conceptually and empirically, alternative notions of potential output within DSGE models. Furthermore, it provides historical estimates of potential output/output gaps on the basis of selected DSGE models developed by the European System of Central Banks’ staff. These estimates are compared to the corresponding estimates obtained applying more traditional methods. Finally, the paper assesses the usefulness of the DSGE model-based output gaps for gauging inflationary pressures.

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Bibliographic Info

Paper provided by Bank of Lithuania in its series Bank of Lithuania Working Paper Series with number 9.

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Length: 48 pages
Date of creation: 03 Jun 2011
Date of revision:
Handle: RePEc:lie:wpaper:9

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Related research

Keywords: potential output; simulation and forecasting models; monetary policy;

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Cited by:
  1. Grech, Aaron George, 2013. "Adapting the Hodrick-Prescott Filter for Very Small Open Economies," MPRA Paper 48803, University Library of Munich, Germany.
  2. Harri Kemp, 2014. "Measuring potential output for the South African economy: Embedding information about the financial cycle," Working Papers 03/2014, Stellenbosch University, Department of Economics.

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