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Estimating the Output Gap to Support the Management of Interest Rates in Vietnam

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  • Giang Huong Nguyen

    (The State Bank of Vietnam)

Abstract

In this paper, I apply three methods to estimate the output gap for Vietnam to support the conduct of monetary policy of the State Bank: the Hodrick-Prescott Filter, the production function approach and Bayesian estimation. I then compare the results obtained from these approaches and discuss their advantages and disadvantages to choose the optimal method for the estimation of the output gap for the State Bank of Vietnam. For the Bayesian approach, my paper closedly relies on the paper of Tim Willems (2011) with some modifications to fit the situation of Vietnam. The output gap estimated by Bayesian method appears to be the most consistent with the economic developments of Vietnam.

Suggested Citation

  • Giang Huong Nguyen, 2014. "Estimating the Output Gap to Support the Management of Interest Rates in Vietnam," IHEID Working Papers 05-2014, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp05-2014
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    References listed on IDEAS

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    5. Mr. Natan P. Epstein & Corrado Macchiarelli, 2010. "Estimating Poland's Potential Output: A Production Function Approach," IMF Working Papers 2010/015, International Monetary Fund.
    6. Murat Ungor, 2012. "A Production Function Method of Estimating the Output Gap," CBT Research Notes in Economics 1219, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    7. Francesca D'Auria & Cécile Denis & Karel Havik & Kieran Mc Morrow & Christophe Planas & Rafal Raciborski & Werner Roger & Alessandro Rossi, 2010. "The production function methodology for calculating potential growth rates and output gaps," European Economy - Economic Papers 2008 - 2015 420, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    8. Carlos Robalo Marques & Pedro Duarte Neves & Susana Botas, 1998. "Estimation of potencial output for the Portuguese economy," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
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    Cited by:

    1. Wolassa L. Kumo, 2022. "Working Paper 362 - Economic Growth, Total Factor Productivity and Output Gap in Sierra Leone," Working Paper Series 2488, African Development Bank.

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