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Univariate Potential Output Estimations for Hungary

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Author Info

  • Gabor Vadas

    (Magyar Nemzeti Bank)

  • Zsolt Darvas

    (Magyar Nemzeti Bank)

Abstract

Potential output figures are important ingredients of many macroeconomic modelsand are routinely applied by policy makers and global agencies. Despite itswidespread use, estimation of potential output is at best uncertain and dependsheavily on the model. The task of estimating potential output is an even moredubious exercise for countries experiencing huge structural changes, such astransition countries. In this paper we apply univariate methods to estimate andevaluate Hungarian potential output, paying special attention to structural breaks.In addition to statistical evaluation, we also assess the appropriateness of variousmethods by expertise judgement of the results, since we argue that mechanicaladoption of univariate techniques might led to erroneous interpretation of thebusiness cycle. As all methods have strengths and weaknesses, we derive a singlemeasure of potential output by weighting those methods that pass both thestatistical and expertise criteria. As standard errors, which might be used forderiving weights, are not available for some of the methods, we base our weightson similar but computable statistics, namely on revisions of the output gap for alldates by recursively estimating the models. Finally, we compare our estimated gapswith the result of the only published Hungarian output gap measure of Darvas-Simon (2000b), which is based on an economic model.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0512009.

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Length: 86 pages
Date of creation: 15 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0512009

Note: Type of Document - pdf; pages: 86
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Web page: http://128.118.178.162

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Keywords: ombination; detrending; new EU members; OCA; output gap; revision;

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References

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  1. Zsolt Darvas & András Simon, 1999. "Capital Stock and Economic Development in Hungary," MNB Working Papers 1999/3, Magyar Nemzeti Bank (the central bank of Hungary).
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Citations

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Cited by:
  1. Darvas, Zsolt & Szapáry, György, 2004. "Konjunktúraciklusok együttmozgása a régi és új EU-tagországokban
    [Business cycle harmonization in new and old EU member-states]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 415-448.
  2. Moisa, Altar & Necula, Ciprian & Bobeica, Gabriel, 2010. "Estimating Potential GDP for the Romanian Economy. An Eclectic Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-25, September.
  3. Moisa Altar & Ciprian Necula & Gabriel Bobeica, 2009. "A Robust Assessment of the Romanian Business Cycle," Advances in Economic and Financial Research - DOFIN Working Paper Series 28, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB.

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