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Potential Output in Iran; A Comparison of Alternative Methods, 1978-2008

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  • Mirjalili, Seyed hossein
  • Dehghan Khavari, Saeed

Abstract

This paper examines potential output with alternative methods for the period 1978-2008 using annual data of the Iranian economy. We applied Hodrick – Prescott Filter, Production Function and SVAR methods for estimation of annually potential output. The results show that the turning points for these methods look similar and almost produce similar results for output gap. Also the estimated potential output and output gap are conformed to economic and political events as output gap has decreased in war period (1980-1989) because of war expenditures, reducing production and therefore decreasing GDP. Also Iranian economy has been faced with negative output gap and therefore a severe recession because of the crisis in South East Asia in late 1990s. Gap trend is uprising after 2005 for the reason that happening oil shock and economic advancement for increasing oil income.

Suggested Citation

  • Mirjalili, Seyed hossein & Dehghan Khavari, Saeed, 2012. "Potential Output in Iran; A Comparison of Alternative Methods, 1978-2008," MPRA Paper 124179, University Library of Munich, Germany, revised Oct 2012.
    • Handle: RePEc:pra:mprapa:124179
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    References listed on IDEAS

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    More about this item

    Keywords

    Potential output; Output gap; Hodrick-Prescott Filter; Production Function; Structural VAR; Iran;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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