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The Utilization-Adjusted Output Gap; Is the Russian Economy Overheating?

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  • Nienke Oomes
  • Oksana Dynnikova

Abstract

This paper estimates the output gap in Russia using a utilization-adjusted production function approach, which we argue is preferable to traditional output gap methods. The approach amounts to (1) using available surveys to estimate the "natural rates" of capacity and labor utilization above which inflation begins to accelerate; (2) estimating a production function with utilization-adjusted capital and labor inputs; and (3) defining potential output as the level of output obtained when both capital and labor are at their estimated natural rates. The results suggest that the output gap in Russia was negative between 1999 and 2003, but may have recently become positive, thus contributing to inflationary pressures.

Suggested Citation

  • Nienke Oomes & Oksana Dynnikova, 2006. "The Utilization-Adjusted Output Gap; Is the Russian Economy Overheating?," IMF Working Papers 06/68, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:06/68
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. repec:eee:rujoec:v:3:y:2017:i:3:p:240-262 is not listed on IDEAS
    2. Eteri Kvintradze, 2010. "Russia's Output Collapse and Recovery; Evidence from the Post-Soviet Transition," IMF Working Papers 10/89, International Monetary Fund.
    3. International Monetary Fund, 2010. "Republic of Belarus; Selected Issues," IMF Staff Country Reports 10/16, International Monetary Fund.
    4. Voskoboynikov, Ilya B., 2012. "New measures of output, labour and capital in industries of the Russian economy," GGDC Research Memorandum GD-123, Groningen Growth and Development Centre, University of Groningen.
    5. Garbis Iradian & Thomas I. Palley & Julia Wörz, 2007. "Monthly Report No. 3/2007," wiiw Monthly Reports 2007-03, The Vienna Institute for International Economic Studies, wiiw.
    6. repec:dgr:rugggd:gd-123 is not listed on IDEAS
    7. Aleksejs Meļihovs & Anna Zasova, 2009. "Assessment of the natural rate of unemployment and capacity utilisation in Latvia," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 9(2), pages 25-46, December.
    8. Garbis Iradian, 2007. "Rapid Growth in Transition Economies; Growth-Accounting Approach," IMF Working Papers 07/164, International Monetary Fund.
    9. Michaelides, Panayotis & Milios, John, 2009. "TFP change, output gap and inflation in the Russian Federation (1994-2006)," Journal of Economics and Business, Elsevier, vol. 61(4), pages 339-352, July.
    10. Dana Kloudova, 2015. "Estimating Output Gap and Potential Output for Russia and Its Usefulness by Forecasting Inflation," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 4(1), pages 45-59, March.
    11. Kloudová Dana, 2014. "Estimating Output Gap and Potential Output for Russia and Its Uselfulness by Forecasting Inflation," Proceedings of Economics and Finance Conferences 0402134, International Institute of Social and Economic Sciences.
    12. International Monetary Fund, 2010. "Estimates of the Output Gap in Armenia with Applications to Monetary and Fiscal Policy," IMF Working Papers 10/197, International Monetary Fund.
    13. repec:dgr:rugggd:gd-137 is not listed on IDEAS
    14. Kaitila, Ville, 2015. "GDP Growth in Russia: Different Capital Stock Series and the Terms of Trade," ETLA Working Papers 28, The Research Institute of the Finnish Economy.
    15. Marcel P. Timmer & Ilya B. Voskoboynikov, 2014. "Is Mining Fuelling Long-Run Growth in Russia? Industry Productivity Growth Trends Since 1995," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(S2), pages 398-422, November.
    16. Dana Kloudová, 2016. "Does Using Nairu In The Production Function Influence Estimation Of Potential Output And Output Gap?," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 5(2), pages 1-21, June.
    17. Antonio Spilimbergo, 2007. "Measuring the Performance of Fiscal Policy in Russia," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 43(6), pages 25-44, November.
    18. repec:taf:pocoec:v:28:y:2016:i:2:p:129-145 is not listed on IDEAS
    19. Polbin, Andrey & Skrobotov, Anton, 2017. "Спектральная Оценка Компоненты Бизнес Цикла Ввп России С Учетом Высокой Зависимости От Условий Торговли
      [Spectral estimation of the business cycle component of the Russian GDP under high dependence
      ," MPRA Paper 78667, University Library of Munich, Germany.

    More about this item

    Keywords

    Capacity utilization; Labor mobility; Labor markets; Inflation; Russian Federation; Output gap; natural rate; Phillips curve; Russia; survey; surveys; equation; sample size;

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