Which Output Gap Measure Matters for the Arab Gulf Cooperation Council Countries (AGCC): The Overall GDP Output Gap or the Non-Oil Sector Output Gap?
AbstractIn this paper we estimate the output gaps of the AGCC countries using four different methods that are: the linear trend model, Hodrick-Prescott filter, Band-Pass filter and the unobserved components model. To perform meaningful comparisons, we differentiate between the overall and non-oil output gap and estimate their respective gaps. Several primary conclusions are manifestly noted from our analysis. First, all the different methods but the unobserved components model has produced almost similar results. Second, our results indicate that all the countries in the region have similar business cycles. Third, we find that there is no significant difference between the overall output gap measures and the non-oil output gaps for all the countries in the region. Fourth, the estimated output gaps did not have any explanatory power on domestic inflation for all the countries with the exception of Saudi Arabia and Oman.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 11612.
Date of creation: Oct 2008
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; Output gap; Inflation; Hodrick-Prescott filter; Frequency domain filter; Band-Pass filter; Unobserved Components model; Kalman filter; Phillips Curve;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
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