IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Estimating Potential Output : a Survey of the Alternative Methods and their Applications to Brazil

  • Nelson H. Barbosa Filho

This paper presents the main issues involved in estimating potential output. Theobjective is to describe the alternative methods and analyze their application andimplications for growth forecasts and macroeconomic policy in Brazil. The textemphasizes the determinants of potential output under fixed and flexible coefficientsof production. Given the wide use of aggregate measures of Total Factor Productivityin growth accounting, and the sensitivity of such a variable to economic assumptionsand errors of measurement, the text also presents the main applied critiques andalternatives to aggregate growth-accounting exercises. The main conclusions are: i)the annual potential growth rate of Brazil?s Gross Domestic Product (GDP) variessubstantially depending on the method and hypotheses adopted and, what is mostimportant, potential GDP is not separable from effective GDP in the long-run; ii)growth-accounting and time-series studies of Brazil result in low potential-outputgrowth rates because they extrapolate the slow growth of 1981-2003 to the future;iii) capital seems to be the main constraint on growth in Brazil and, therefore, ademand-led increase in investment can raise both its effective and potential outputlevels; iv) however, because of the slow adjustment of the capital stock, an investmentboom can also hit a supply constraint before the stock of capital has time to adjust tothe growth rate of investment; and v) aggregate measures of potential output do notcarry much information about the economy and, therefore, they should becomplemented by sectoral estimates of capacity utilization to identify the bottlenecksin inter-industry flows and the corresponding demand pressures on inflation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ipea.gov.br/portal/images/stories/PDFs/TDs/td_1092.pdf
Download Restriction: no

Paper provided by Instituto de Pesquisa Econômica Aplicada - IPEA in its series Discussion Papers with number 1092.

as
in new window

Length: 79 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:ipe:ipetds:1092
Contact details of provider: Postal: SBS - Quadra 01 - Bloco J - Ed. BNDES, Brasília, DF - 70076-90
Phone: +55(061)315-5000
Fax: +55(61)321-1597
Web page: http://www.ipea.gov.br
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72 National Bureau of Economic Research, Inc.
  2. James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc.
  3. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Zvi Griliches, 1996. "The Discovery of the Residual: A Historical Note," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1324-1330, September.
  5. Xavier X. Sala-i-Martin, 1997. "I Just Ran Four Million Regressions," NBER Working Papers 6252, National Bureau of Economic Research, Inc.
  6. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, vol. 18(1), pages 49-75, July.
  7. Marcelo Kfoury Muinhos & Sergio Afonso Lago Alves, 2003. "Medium-Size Macroeconomic Model for the Brazilian Economy," Working Papers Series 64, Central Bank of Brazil, Research Department.
  8. Nelson H. Barbosa-Filho, 1999. "A Note on the Theory of Demand-Led Growth," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 1999-06, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  9. A. P. Thirlwall, 1983. "A Plain Man's Guide to Kaldor's Growth Laws," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 5(3), pages 345-358, April.
  10. Hofman, Andre A, 1992. "Capital Accumulation in Latin America: A Six Country Comparison for 1950-89," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(4), pages 365-401, December.
  11. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, December.
  12. John S. L. McCombie, 1983. "Kaldor's Laws in Retrospect," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 5(3), pages 414-429, April.
  13. Blanchard, O & Katz, L, 1996. "What We Know and Do Not Know about the Natural Rate of Unemployment," Working papers 96-29, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Adalmir Marquetti, 2000. "Estimativa do estoque de riqueza tangível no Brasil, 1950-1998 [An estimate of the fixed tangible wealth in Brazil, 1950-1998]," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 10(2), pages 11-38, December.
  15. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, December.
  16. Stock, James H. & Watson, Mark W., 1999. "Business cycle fluctuations in us macroeconomic time series," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 1, pages 3-64 Elsevier.
  17. Charles R. Hulten, 2000. "Total Factor Productivity: A Short Biography," NBER Working Papers 7471, National Bureau of Economic Research, Inc.
  18. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
  19. Harcourt, G C, 1969. "Some Cambridge Controversies in the Theory of Capital," Journal of Economic Literature, American Economic Association, vol. 7(2), pages 369-405, June.
  20. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
  21. Kim, H Youn, 1992. "The Translog Production Function and Variable Returns to Scale," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 546-52, August.
  22. Zarnowitz, Victor, 1992. "Business Cycles," National Bureau of Economic Research Books, University of Chicago Press, number 9780226978901.
  23. Edmar Lisboa Bacha & Regis Bonelli, 2004. "Accounting for Brazil`s Growth Experience - 1940 - 2002," Discussion Papers 1018, Instituto de Pesquisa Econômica Aplicada - IPEA.
  24. Jesus Felipe & Franklin M. Fisher, 2003. "Aggregation in Production Functions: What Applied Economists should Know," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 208-262, 05.
  25. James K. Galbraith, 1997. "Time to Ditch the NAIRU," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 93-108, Winter.
  26. Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 3-10, Winter.
  27. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
  28. Gomes, Victor & Pessoa, Samuel de Abreu & Veloso, Fernando A., 2003. "Evolução da Produtividade Total dos Fatores na Economia Brasileira: Uma Análise Comparativa," Economics Working Papers (Ensaios Economicos da EPGE) 483, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ipe:ipetds:1092. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fabio Schiavinatto)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.