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Estimating Brazilian Potential Output: A Production Function Approach

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  • Tito Nícias Teixeira da Silva Filho

Abstract

Estimating potential output is at the same time one of the issues of greatest uncertainty in economics and greatest importance for policymakers, an unpleasant combination. This uncertainty fostered the emergence of several methods for calculating the potential output. In this work, the production function approach was chosen because it has important advantages compared to others, although it has limitations. The preliminary results found for the Brazilian economy are the following: a) total factor productivity (TFP) decreased in the last two decades, however, the negative trend was reverted after 1992 and, since then, TFP has been growing, on average, 0,9% per year; b) since 1980, most of the time the Brazilian economy has been below its potential. The years with strongest activity were 1980, 1985 and 1986; c) simulations involving different scenarios for investment and TFP growth rates, show that the average potential output growth for the 2001-05 period should be between 3,3% and 4,5%; d) although these figures are much lower than those registered before 1980, they are higher than the average GDP growth in the last two decades; e) because of the deep structural changes the Brazilian economy has been experiencing recently, we can expect TFP growth to increase in the next years. Even so, without increasing investment rates significantly, Brazil will not grow at rates near to its historical average.

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  • Tito Nícias Teixeira da Silva Filho, 2002. "Estimating Brazilian Potential Output: A Production Function Approach," Working Papers Series 17, Central Bank of Brazil, Research Department.
  • Handle: RePEc:bcb:wpaper:17
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    References listed on IDEAS

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    Cited by:

    1. Juan Jung & Enrique López-Bazo, 2017. "“On the regional impact of broadband on productivity: the case of Brazil”," AQR Working Papers 201704, University of Barcelona, Regional Quantitative Analysis Group, revised May 2017.
    2. Gonzalo Llosa & Shirley Miller, 2004. "Using Additional Information in Estimating the Output Gap in Peru: a Multivariate Unobserved Component Approach," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 57-82, January-J.
    3. Gonzalo Llosa/Shirley Miller, 2004. "Using additional information in estimating output gap in Peru: a multivariate unobserved component approach," Econometric Society 2004 Latin American Meetings 243, Econometric Society.

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