Angelica E. Njuguna (Kenyatta University and KIPPRA) Stephen N. Karingi (United Nations Economic Commission for Africa) Mwangi S. Kimenyi (University of Connecticut)
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Measuring the level of an economy.s potential output and output gap are essential in identifying a sustainable non-inflationary growth and assessing appropriate macroeconomic policies. The estimation of potential output helps to determine the pace of sustainable growth while output gap estimates provide a key benchmark against which to assess inflationary or disinflationary pressures suggesting when to tighten or ease monetary policies. These measures also help to provide a gauge in the determining the structural fiscal position of the government. This paper attempts to measure Kenya.s potential output and output gap using alternative statistical techniques and structural methods. Estimation of potential output and output gap using these techniques shows varied results. The estimated potential output growth using different methods gave a range of .2.9 to 2.4 percent for 2000 and a range of .0.8 to 4.6 for 2001. Although various methods produce varied results, they however provided a broad consensus on the over-all trend and performance of the Kenyan economy. This study found that firstly, potential output growth is declining over the recent time and secondly, the Kenyan economy is contracting in the recent years.
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number
2005-45.
Length: 49 pages Date of creation: Oct 2005 Date of revision: Handle: RePEc:uct:uconnp:2005-45
Note: The authors would like to acknowledge the valuable research assistance provided by Paul Gachanja; and the helpful comments from the participants of the 8th Annual Conference on Econometric Modelling for Africa (University of Stellenbosch, South Africa, July 2003), particularly from Adrian Pagan, John Muellbauer, Stephen Hall and Nelene Ehlers; also of John Randa from KIPPRA. Contact details of provider: Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063 Phone: (860) 486-4889 Fax: (860) 486-4463 Web page: http://www.econ.uconn.edu/ More information through EDIRC
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Find related papers by JEL classification: N10 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - General, International, or Comparative N17 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - Africa; Oceania O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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