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Potential Output in a Commodity‐Exporting Economy

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  • Nadine Yamout

Abstract

The surge in global demand for natural resources has driven the terms of trade in commodity‐exporting economies to historically high levels. A critical question is how the upswing in commodity prices influences these economies' potential output. I estimate the potential output and output gap that are consistent with a small open economy model featuring a commodities sector and study the implications of permanent commodity price changes on potential output and output gap. Following a 70 per cent permanent commodity price increase, the output gap improves on impact but deteriorates afterwards, falling to −0.75 per cent in the transition.

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  • Nadine Yamout, 2022. "Potential Output in a Commodity‐Exporting Economy," The Economic Record, The Economic Society of Australia, vol. 98(320), pages 42-62, March.
    • Handle: RePEc:bla:ecorec:v:98:y:2022:i:320:p:42-62
    DOI: 10.1111/1475-4932.12643
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    References listed on IDEAS

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    Cited by:

    1. Isaac Gross & Andrew Leigh, 2022. "Assessing Australian Monetary Policy in the Twenty‐First Century," The Economic Record, The Economic Society of Australia, vol. 98(322), pages 271-295, September.

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