Double conditioned potential output
AbstractThe central point of this paper is that both - internal and external - equilibria ought to be involved in the estimation of potential output. If only the data on inflation, unemployment rate and wages are used for its evaluation, no certainty exists that such a level will correspond to a stable foreign trade balance. Our attempt is based on the following methodological assumptions: • the potential output is concomitantly associated with a constant inflation and sustainable relative foreign trade balance (ratio of net export to gross domestic product); • all supply shocks affect this level, potential output being, therefore, a variable indicator; • consequently, the output gap reflects exclusively the demand pressure. The proposed computational algorithm comprises utilisation of orthogonal regression. It is exemplified on seasonally adjusted quarterly statistical series of the Romanian transition economy; this application shows that the output gap really contains significant regular and irregular cyclical components.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 35769.
Date of creation: 2004
Date of revision:
Potential Output; Output Gap; Orthogonal Regression; Cycle;
Other versions of this item:
- Dobrescu, Emilian, 2007. "Double Conditioned Potential Output," Working Papers of Institute for Economic Forecasting 070701, Institute for Economic Forecasting.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gunnar B�rdsen & Ragnar Nymoen, 2003.
"Testing Steady-State Implications for the NAIRU,"
The Review of Economics and Statistics,
MIT Press, vol. 85(4), pages 1070-1075, November.
- David G. Blanchflower & Andrew J. Oswald, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-167, Summer.
- Clements,Michael & Hendry,David, 1998.
"Forecasting Economic Time Series,"
Cambridge University Press, number 9780521632423.
- Olivier Blanchard & Pedro Portugal, 1998.
"What Hides Behind An Unemployment Rate: Comparing Portuguese and Us Unemployment,"
w199803, Banco de Portugal, Economics and Research Department.
- Olivier Blanchard & Pedro Portugal, 1998. "What Hides Behind an Umemployment Rate: Comparing Portuguese and U.S. Unemployment," NBER Working Papers 6636, National Bureau of Economic Research, Inc.
- 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.
- Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
- Blanchflower, David G & Oswald, Andrew J, 1990.
" The Wage Curve,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 92(2), pages 215-35.
- Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
- Dolado, J.J. & Jimeno, J.F., 1995.
"Why Is Spanish Unemployment so High?,"
9515, Centro de Estudios Monetarios Y Financieros-.
- Angela Black & Felix R. FitzRoy, 2000.
"Earnings Curves and Wage Curves,"
Discussion Paper Series, Department of Economics
200004, Department of Economics, University of St. Andrews.
- Evans, George W, 1989. "Output and Unemployment Dynamics in the United States: 1950-1985," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(3), pages 213-37, July-Sept.
- Marianne Baxter & Robert G. King, 1999.
"Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series,"
The Review of Economics and Statistics,
MIT Press, vol. 81(4), pages 575-593, November.
- Tom Doan, . "BKFILTER: RATS procedure to implement band pass filter using Baxter-King method," Statistical Software Components RTS00026, Boston College Department of Economics.
- Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc.
- Domenech, Rafael & Gomez, Victor, 2006. "Estimating Potential Output, Core Inflation, and the NAIRU as Latent Variables," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 354-365, July.
- Michael F. Bryan & Stephen G. Cecchetti, 1993.
"Measuring Core Inflation,"
NBER Working Papers
4303, National Bureau of Economic Research, Inc.
- Robert J. Gordon, 1997.
"The Time-Varying NAIRU and Its Implications for Economic Policy,"
Journal of Economic Perspectives,
American Economic Association, vol. 11(1), pages 11-32, Winter.
- Robert J. Gordon, 1996. "The Time-Varying NAIRU and its Implications for Economic Policy," NBER Working Papers 5735, National Bureau of Economic Research, Inc.
- Gordon, Robert J, 1996. "The Time-varying NAIRU and its Implications for Economic Policy," CEPR Discussion Papers 1492, C.E.P.R. Discussion Papers.
- Paul Conway & Ben Hunt, 1997. "Estimating potential output: a semi-structural approach," Reserve Bank of New Zealand Discussion Paper Series G97/9, Reserve Bank of New Zealand.
- Olivier Jean Blanchard & Lawrence Katz, 1999.
"Wage Dynamics: Reconciling Theory and Evidence,"
NBER Working Papers
6924, National Bureau of Economic Research, Inc.
- Albu, Lucian Liviu, 2008. "Strain and Inflation-Unemployment Relationship in Transitional Economies: A theoretical and empirical investigation," Working Papers of Institute for Economic Forecasting 081103, Institute for Economic Forecasting.
- George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
- Douglas Staiger & James H. Stock & Mark W. Watson, 1996.
"How Precise are Estimates of the Natural Rate of Unemployment?,"
NBER Working Papers
5477, National Bureau of Economic Research, Inc.
- Douglas O. Staiger & James H. Stock & Mark W. Watson, 1997. "How Precise Are Estimates of the Natural Rate of Unemployment?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 195-246 National Bureau of Economic Research, Inc.
- Karl Whelan, 1997. "Wage curve vs. Phillips curve: are there macroeconomic implications?," Finance and Economics Discussion Series 1997-51, Board of Governors of the Federal Reserve System (U.S.).
- Engelbert Stockhammer, 2000. "Explaining European Unemployment: Testing the NAIRU Theory and a Keynesian Approach," Department of Economics Working Papers wuwp068, Vienna University of Economics, Department of Economics.
- Dobrescu, Emilian, 1996. "Macromodels of the Romanian transition Economy," MPRA Paper 35810, University Library of Munich, Germany.
- Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 3-10, Winter.
- Cochrane, John H, 1994. "Permanent and Transitory Components of GNP and Stock Prices," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 241-65, February.
- Laurence M. Ball, 1997.
"Disinflation and the NAIRU,"
in: Reducing Inflation: Motivation and Strategy, pages 167-194
National Bureau of Economic Research, Inc.
- Jørgen Elmeskov, 1993. "High and Persistent Unemployment: Assessment of the Problem and Its Causes," OECD Economics Department Working Papers 132, OECD Publishing.
- Stock, James H & Watson, Mark W, 1988. "Variable Trends in Economic Time Series," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 147-74, Summer.
- Gerlach, Stefan & Smets, Frank, 1999. "Output gaps and monetary policy in the EMU area1," European Economic Review, Elsevier, vol. 43(4-6), pages 801-812, April.
- Douglas Staiger & James H. Stock & Mark W. Watson, 2001. "Prices, Wages and the U.S. NAIRU in the 1990s," NBER Working Papers 8320, National Bureau of Economic Research, Inc.
- Ghizdeanu, Ion & Neagu, Marian, 2003. "Estimarea produsului intern brut potential," Working Papers of Macroeconomic Modelling Seminar 030104, Institute for Economic Forecasting.
- Clark, Peter K, 1987. "The Cyclical Component of U.S. Economic Activity," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 797-814, November.
- Dobrescu, Emilian, 2010. "Macromodel Simulations for the Romanian Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 7-28, July.
- Petre Caraiani, 2009. "An Estimation of Output Gap in Romanian Economy Using the DSGE Approach," Prague Economic Papers, University of Economics, Prague, vol. 2009(4), pages 366-379.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.