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Inflation-adjusted potential output

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  • Jane Haltmaier

Abstract

This paper estimates potential output for seven countries using a multivariate version of the Hodrick-Prescott filter in which observations on inflation are used to help separate trend from cyclical movements in output. The potential series are estimated first on an aggregate basis, and then by disaggregating output into three major components: labor productivity, the employment-population ratio, and population. Potential levels of productivity and the employment-population ratios are calculated using the multivariate filter and combined with actual population to derive an alternative, \"disaggregated\" estimate of potential. The method is then applied to forecasting potential growth.

Suggested Citation

  • Jane Haltmaier, 1996. "Inflation-adjusted potential output," International Finance Discussion Papers 561, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:561
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    References listed on IDEAS

    as
    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. P Clark & D Laxton, 1997. "Phillips Curves," CEP Discussion Papers dp0344, Centre for Economic Performance, LSE.
    3. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    4. Charles Adams & David T. Coe, 1990. "A Systems Approach to Estimating the Natural Rate of Unemployment and Potential Output for the United States," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 232-293, June.
    5. Kuttner, Kenneth N, 1994. "Estimating Potential Output as a Latent Variable," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 361-368, July.
    6. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
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    Cited by:

    1. Odile Chagny & Matthieu Lemoine, 2004. "An estimation of the Euro Area potential output with a semi-structural multivariate Hodrick-Prescott filter," Working Papers hal-00972840, HAL.
    2. Drew, Aaron & Hunt, Benjamin, 2000. "Efficient simple policy rules and the implications of potential output uncertainty," Journal of Economics and Business, Elsevier, vol. 52(1-2), pages 143-160.
    3. Yasuo Hirose & Koichiro Kamada, 2001. "A New Technique for Simultaneous Estimation of the Output Gap and Phillips Curve," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.
    4. Paul Conway & David Frame, 2000. "A spectral analysis of New Zealand output gaps using Fourier and wavelet techniques," Reserve Bank of New Zealand Discussion Paper Series DP2000/06, Reserve Bank of New Zealand.
    5. Paul Conway & Ben Hunt, 1997. "Estimating potential output: a semi-structural approach," Reserve Bank of New Zealand Discussion Paper Series G97/9, Reserve Bank of New Zealand.
    6. Matthieu LEMOINE & Odile CHAGNY, 2005. "Estimating the potential output of the euro area with a semi-structural multivariate Hodrick-Prescott filter," Computing in Economics and Finance 2005 344, Society for Computational Economics.

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    Keywords

    Inflation (Finance);

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