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Estimating Brazilian Potential Output: A Production Function Approach

  • Tito Nícias Teixeira da Silva Filho

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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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps17.pdf
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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 17.

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Date of creation: Aug 2002
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Handle: RePEc:bcb:wpaper:17
Contact details of provider: Web page: http://www.bcb.gov.br/?english

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  1. Emanuel-Werner Kohlscheen, 2000. "Estimating Exchange Market Pressure and Intervention Activity," Working Papers Series 9, Central Bank of Brazil, Research Department.
  2. Pedro H. Albuquerque, 2005. "Os Impactos Econômicos da CPMF: Teoria e Evidência," Public Economics 0511020, EconWPA, revised 26 Nov 2005.
  3. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
  4. Barbosa, Fernando de Holanda, 1989. "Macroeconomia," Economics Working Papers (Ensaios Economicos da EPGE) 138, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  5. Araújo, Aloísio Pessoa de & Leon, Márcia Saraiva, 2002. "Speculative Attacks on Debts, Dollarization and Optimum Currency Areas," Economics Working Papers (Ensaios Economicos da EPGE) 446, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  6. Marcelle Chauvet, 2000. "Leading Indicators of Inflation for Brazil," Working Papers Series 7, Central Bank of Brazil, Research Department.
  7. Bonomo, M. A. & Brito, R.D., 2001. "Regras Monetárias e Dinâmica Macroeconomica no Brasil: uma abordagem de expectativas racionais," Insper Working Papers wpe_11, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  8. Eduardo Lundberg, 2000. "Monetary Policy and Banking Supervision Functions on the Central Bank," Working Papers Series 2, Central Bank of Brazil, Research Department.
  9. Victorio Y. T. Chu & Márcio I. Nakane, 2001. "Credit Channel without the LM Curve," Working Papers Series 20, Central Bank of Brazil, Research Department.
  10. Pedro H. Albuquerque, 2000. "An Information Theory Approach to the Aggregation of Log-Linear Models," Working Papers Series 4, Central Bank of Brazil, Research Department.
  11. Francisco Marcos Rodrigues Figueiredo, 2001. "Evaluating Core Inflation Measures for Brazil," Working Papers Series 14, Central Bank of Brazil, Research Department.
  12. Francisco Marcos R. Figueiredo & Roberta Blass Staub, 2001. "Algumas Considerações Sobre a Sazonalidade no IPCA," Working Papers Series 31, Central Bank of Brazil, Research Department.
  13. Mauro Costa Miranda, 2001. "Crises Cambiais e Ataques Especulativos no Brasil," Working Papers Series 32, Central Bank of Brazil, Research Department.
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