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Measuring Potential Growth in Japan: Some Practical Caveats

Author

Listed:
  • Takuji Fueki

    (Bank of Japan)

  • Ichiro Fukunaga

    (Bank of Japan)

  • Hibiki Ichiue

    (Bank of Japan)

  • Toshitaka Sekine

    (Bank of Japan)

  • Toyoichiro Shirota

    (Bank of Japan)

Abstract

Economists at central banks and in academia have made various efforts to measure potential growth, something that cannot be observed directly. This review introduces some of these estimation techniques and applies them to the Japanese data. The estimates of the potential growth rate can differ considerably, depending on the methods used; all of these estimates are subject to substantial errors; and the reliability of the estimates is severely hampered whenever turbulence is rife in the economy. Although all approaches introduced in this review suggest that the potential growth rate in Japan has recently declined, significant uncertainty remains regarding the magnitude of its fall. Substantial margins of error must be taken into account with any estimates of the potential growth rate.

Suggested Citation

  • Takuji Fueki & Ichiro Fukunaga & Hibiki Ichiue & Toshitaka Sekine & Toyoichiro Shirota, 2010. "Measuring Potential Growth in Japan: Some Practical Caveats," Bank of Japan Review Series 10-E-1, Bank of Japan.
    • Handle: RePEc:boj:bojrev:10-e-1
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    File URL: http://www.boj.or.jp/en/research/wps_rev/rev_2010/data/rev10e01.pdf
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    Cited by:

    1. Takuji Fueki & Ichiro Fukunaga & Hibiki Ichiue & Toyoichiro Shirota, 2016. "Measuring Potential Growth with an Estimated DSGE Model of Japan’s Economy," International Journal of Central Banking, International Journal of Central Banking, vol. 12(1), pages 1-32, March.
    2. A. V. Zubarev & P. V. Trunin, 2017. "The analysis of the dynamics of the Russian economy using the output gap indicator," Studies on Russian Economic Development, Springer, vol. 28(2), pages 126-132, March.

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