IDEAS home Printed from https://ideas.repec.org/p/boi/wpaper/2000.04.html
   My bibliography  Save this paper

Measuring the Output Gap and Its Influence on the Import Surplus

Author

Listed:
  • Yigal Menashe

    (Bank of Israel)

  • Yosef Mealem

    (Bank of Israel)

Abstract

In this paper, we measure the output gap which is calculated both annually and quarterly for the period 1986-1999, and its influence on the import surplus. Analysis of the output gap's cyclical components - the deviation in private sector labor input and the deviation in productivity and capital utilization – shows that the output gap during the years 1997-1999 reflected both the increase in unemployment and low rates of productivity or capital utilization. The annual data indicate that potential output and actual private sector output grew at an average rate of 6-7 percent during the first half of the 90s. In following years, potential output grew at a more moderate rate of 4-5 percent. The results show a positive relationship between the output gap and the import surplus, which can be explained if we view the output gap as a proxy for surplus demand. Thus, a negative output gap reflects a negative demand surplus which can arise in the short run through a decrease in local demand, as occurred in the slowdown of 1997-1999. This decrease will result in a drop in the relative prices of local products which will, to a certain extent, lead to increased local production and a decrease in the import surplus. This positive relationship is maintained even when taking into account the positive influence of immigration on imports in the regression equation.

Suggested Citation

  • Yigal Menashe & Yosef Mealem, 2000. "Measuring the Output Gap and Its Influence on the Import Surplus," Bank of Israel Working Papers 2000.04, Bank of Israel.
    • Handle: RePEc:boi:wpaper:2000.04
    as

    Download full text from publisher

    File URL: https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_2000.04.pdf
    File Function: First version, 2000
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fabio Scacciavillani & Phillip Swagel, 2002. "Measures of potential output: an application to Israel," Applied Economics, Taylor & Francis Journals, vol. 34(8), pages 945-957.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Elkayam, 2001. "A Model For Monetary Policy Under Inflation Targeting: The Case Of Israel," Bank of Israel Working Papers 2001.03b, Bank of Israel.
    2. Yigal Menashe & Yossi Yakhin, 2004. "Mind the Gap: Structural and Nonstructural Approaches to Estimating Israel's Output Gap," Israel Economic Review, Bank of Israel, vol. 2(2), pages 79-106.
    3. Dainis Stikuts, 2003. "Measuring Output Gap in Latvia," Working Papers 2003/02, Latvijas Banka.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Charlotte DU Toit & Elna Moolman, 2003. "Estimating Potential Output And Capacity Utilisation For The South African Economy," South African Journal of Economics, Economic Society of South Africa, vol. 71(1), pages 96-118, March.
    2. Jose Miguel Albala-Bertrand, 2004. "Can the Composition of Capital Constrain Potential Output? A Gap Approach," Working Papers 510, Queen Mary University of London, School of Economics and Finance.
    3. Mr. Andreas Billmeier, 2004. "Ghostbusting: Which Output Gap Measure Really Matters?," IMF Working Papers 2004/146, International Monetary Fund.
    4. S. Adnan H. A. S. Bukhari & Safdar Ullah Khan, 2008. "Estimating Output Gap for Pakistan Economy: Structural and Statistical Approaches," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 4, pages 31-60.
    5. Odile Chagny & Jörg Döpke, 2001. "Measures of the Output Gap in the Euro-Zone: An Empirical Assessment of Selected Methods," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(3), pages 310-332.
    6. Angelica E. Njuguna & Stephen N. Karingi & Mwangi S. Kimenyi, 2005. "Measuring Potential Output and Output Gap and Macroeconomic Policy: The Case of Kenya," Working papers 2005-45, University of Connecticut, Department of Economics.
    7. Zsolt Darvas & Gábor Vadas, 2003. "Univariate Potential Output Estimations for Hungary," MNB Working Papers 2003/8, Magyar Nemzeti Bank (Central Bank of Hungary).
    8. Moisa Altar & Ciprian Necula & Gabriel Bobeica, 2009. "A Robust Assessment of the Romanian Business Cycle," Advances in Economic and Financial Research - DOFIN Working Paper Series 28, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB.
    9. Moisa, Altar & Necula, Ciprian & Bobeica, Gabriel, 2010. "Estimating Potential GDP for the Romanian Economy. An Eclectic Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-25, September.
    10. Yigal Menashe & Yossi Yakhin, 2004. "Mind the Gap: Structural and Nonstructural Approaches to Estimating Israel's Output Gap," Israel Economic Review, Bank of Israel, vol. 2(2), pages 79-106.
    11. Jorge Iván RODRIGUEZ MUNOZ & Juan Ricardo PERILLA JIMENEZ & José Daniel REYES PEÑA, 2004. "Cálculo del PIB Potencial en Colombia.:1970-2003," Archivos de Economía 2078, Departamento Nacional de Planeación.
    12. Aaron G. Grech, "undated". "Investigating potential output using the Hodrick-Prescott filter: an application for Malta," CBM Working Papers WP/02/2014, Central Bank of Malta.
    13. Jaromír Hurník & Dana Hájková, 2007. "Supply-Side Performance in the Czech Republic: A Macroeconomic View (1995-2005)," Prague Economic Papers, Prague University of Economics and Business, vol. 2007(4), pages 319-335.
    14. Hogrefe, Jan & Sachs, Andreas, 2014. "Unemployment and labor reallocation in Europe," ZEW Discussion Papers 14-083, ZEW - Leibniz Centre for European Economic Research.
    15. Nikolay Peykov, 2021. "Sectoral Output Gaps – Estimates for Bulgaria," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 5-26, March.
    16. Kappler, Marcus, 2007. "Projecting the Medium-Term: Outcomes and Errors for GDP Growth," ZEW Discussion Papers 07-068, ZEW - Leibniz Centre for European Economic Research.
    17. Mr. Angel J. Ubide & Mr. Kevin Ross, 2001. "Mind the Gap: What is the Best Measure of Slack in the Euro Area?," IMF Working Papers 2001/203, International Monetary Fund.
    18. Jaromír Hurník & David Navrátil, 2005. "Potential Output in the Czech Republic: A Production Function Approach," Prague Economic Papers, Prague University of Economics and Business, vol. 2005(3), pages 253-266.
    19. Cobus Vermeulen, 2023. "The inherent uncertainties in output gap estimation a South African perspective," Working Papers 11051, South African Reserve Bank.
    20. International Monetary Fund, 2010. "Montenegro: 2010 Article IV Consultation-Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Montenegro," IMF Staff Country Reports 2010/155, International Monetary Fund.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boi:wpaper:2000.04. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Yossi Yakhin (email available below). General contact details of provider: https://edirc.repec.org/data/boigvil.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.