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Estimating potential output for New Zealand: a structural VAR approach

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Abstract

One of the main indicators of inflationary pressures used by the Reserve Bank of New Zealand is the output gap. A measure of potential output is obtained using a structural vector autoregression (SVAR) methodology. The assumption that movements in output are the result of cyclical shocks arising from demand-side developments, and productivity shocks arising from supply-side developments provides a set of identifying restrictions. Prior to the reforms, the New Zealand economy was in excess demand with a more prolonged and deeper recession in the early 1990s than alternative methods suggest. Evidence is provided that consumption increases in anticipation of higher future earnings.

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Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number DP2000/03.

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Length: 22p
Date of creation: Jul 1999
Date of revision:
Handle: RePEc:nzb:nzbdps:2000/03

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  8. Timothy Cogley & James M. Nason, 1993. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series: implications for business cycle research," Working Papers in Applied Economic Theory 93-01, Federal Reserve Bank of San Francisco.
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  12. C. John McDermott & David T. Coe, 1996. "Does the Gap Model Work in Asia?," IMF Working Papers 96/69, International Monetary Fund.
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  17. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
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Cited by:
  1. Carlos Hamilton Vasconcelos Araujo & Marta Baltar Moreira Areosa & Osmani Teixera de Carvalho Guillén, 2004. "Estimating Potential Output And The Output Gap For Brazil," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] 041, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  2. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2007. "A Multivariate Long-Memory Model with Structural Breaks," CESifo Working Paper Series 1950, CESifo Group Munich.

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