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The Perennial Problem of Predicting Potential

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Abstract

Potential output?the maximum amount an economy can produce over the long run?is an important indicator policymakers use to gauge a country?s current economic health and expectations for future growth. However, potential output can?t be observed directly, and estimating it is difficult, even with modern, sophisticated methods. Monetary policymakers are well advised to account for the perennial problem of uncertainty surrounding these estimates in devising and carrying out policy strategies.

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  • John C. Williams, 2017. "The Perennial Problem of Predicting Potential," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00147
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    1. Athanasios Orphanides & Simon van Norden, 2002. "The Unreliability of Output-Gap Estimates in Real Time," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 569-583, November.
    2. Bordo, Michael D. & Orphanides, Athanasios (ed.), 2013. "The Great Inflation," National Bureau of Economic Research Books, University of Chicago Press, number 9780226066950, December.
    3. repec:cbo:report:523702 is not listed on IDEAS
    4. Orphanides, Athanasios, 2003. "The quest for prosperity without inflation," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 633-663, April.
    5. John G. Fernald & Robert E. Hall & James H. Stock & Mark W. Watson, 2017. "The Disappointing Recovery of Output after 2009," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 1-81.
    6. Justin Weidner & John C. Williams, 2009. "How big is the output gap?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun12.
    7. Congressional Budget Office, 2017. "An Update to the Budget and Economic Outlook: 2017 to 2027," Reports 52801, Congressional Budget Office.
    8. Michael D. Bordo & Athanasios Orphanides, 2013. "The Great Inflation: The Rebirth of Modern Central Banking," NBER Books, National Bureau of Economic Research, Inc, number bord08-1, July.
    9. Athanasios Orphanides & John C. Williams, 2002. "Robust Monetary Policy Rules with Unknown Natural Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 63-146.
    10. repec:cbo:report:523701 is not listed on IDEAS
    11. Congressional Budget Office, 2017. "The Budget and Economic Outlook: 2017 to 2027," Reports 52370, Congressional Budget Office.
    12. Athanasios Orphanides, 2002. "Monetary-Policy Rules and the Great Inflation," American Economic Review, American Economic Association, vol. 92(2), pages 115-120, May.
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    Cited by:

    1. Helen Louri & Petros Migiakis, 2019. "Financing economic growth in Greece: lessons from the crisis," Working Papers 262, Bank of Greece.
    2. Helen Louri & Petros Migiakis, 2019. "Financing economic activity in Greece: Past challenges and future prospects," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 135, Hellenic Observatory, LSE.
    3. André, Marine C. & Armijo, Alberto & Espidio, Sebastián Medina & Sandoval, Jamel, 2023. "Policy mix in a small open emerging economy with commodity prices," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 4(1).

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