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Estimating the output gap for the Maltese economy

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  • Grech, Aaron George

Abstract

An attempt is made in this paper to arrive at an estimate of the output gap for the Maltese economy on a quarterly and annual basis. Two approaches are adopted, namely the Hodrick-Prescott filter and the aggregate production function method, with their results being benchmarked with the results of two other studies. The methods adopted in this paper indicate that the Maltese economy passed through three separate business cycles during the last three decades, with the size of the fluctuations moderating over time. Potential output growth is estimated to have declined significantly during the nineties, as factors of production are growing by a smaller margin. This indicates the importance of carrying out structural reforms that would boost productivity growth.

Suggested Citation

  • Grech, Aaron George, 2004. "Estimating the output gap for the Maltese economy," MPRA Paper 33663, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:33663
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    File URL: https://mpra.ub.uni-muenchen.de/33663/1/MPRA_paper_33663.pdf
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    References listed on IDEAS

    as
    1. Nelson, Edward & Nikolov, Kalin, 2003. "UK inflation in the 1970s and 1980s: the role of output gap mismeasurement," Journal of Economics and Business, Elsevier, vol. 55(4), pages 353-370.
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    4. Pierre St-Amant & Simon van Norden, 1997. "Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada," Technical Reports 79, Bank of Canada.
    5. Aaron G Grech, "undated". "Assessing employment in Malta," CBM Working Papers WP/01/2006, Central Bank of Malta.
    6. 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.
    7. Grech, Aaron George, 2003. "Employment and the labour input in the Maltese economy," MPRA Paper 33383, University Library of Munich, Germany.
    8. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
    9. Karim Abadir & Gabriel Talmain, 2001. "Depreciation Rates and Capital Stocks," Manchester School, University of Manchester, vol. 69(1), pages 42-51, January.
    10. Ms. Paula De Masi, 1997. "IMF Estimates of Potential Output: Theory and Practice," IMF Working Papers 1997/177, International Monetary Fund.
    11. Cécile Denis & Kieran Mc Morrow & Werner Röger, 2002. "Production function approach to calculating potential growth and output gaps - estimates for the EU Member States and the US," European Economy - Economic Papers 2008 - 2015 176, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    Cited by:

    1. Grech, Aaron George & Micallef, Brian, 2014. "Assessing the supply of the Maltese economy using a production function approach," MPRA Paper 53882, University Library of Munich, Germany.
    2. Aaron G Grech, "undated". "The evolution of the Maltese economy since independence," CBM Working Papers WP/05/2015, Central Bank of Malta.
    3. Grech, Aaron George, 2015. "Structural changes in the Maltese cconomy," MPRA Paper 63632, University Library of Munich, Germany.
    4. Aaron G. Grech (ed.), 2015. "The evolution of the Maltese Economy since Independence," CBM Ebooks, Central Bank of Malta, edition 1, number 02.

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    More about this item

    Keywords

    potential output; output gap;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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