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Calculation Of Capital-To-Output Ratio In A Production Function By Estimating Potential Output And Output Gap: The Case For The Czech Republic And Slovakia

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  • Dana Kloudová

    (University of Economics, Faculty of Economics and Public Administration)

Abstract

One of the most used methods of estimation of potential output and output gap, used by many national and international organisations, is a production function. The aim of this paper is to study the impact of method of computation capital-to-output ratio on results of estimation of output gap and potential output, which are very important, but not measurable. We used two methods of computation. The first one was simple: we set it up constant. The second one was calculated according to a sophisticated model. The results of this paper have shown that using variable capital-to-output ratio will bring not very different results from using a constant one. These results were confirmed both for Czech economy and Slovak economy.

Suggested Citation

  • Dana Kloudová, 2016. "Calculation Of Capital-To-Output Ratio In A Production Function By Estimating Potential Output And Output Gap: The Case For The Czech Republic And Slovakia," Proceedings of Economics and Finance Conferences 3206128, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:3206128
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    File URL: https://iises.net/proceedings/5th-economics-finance-conference-miami/table-of-content/detail?cid=32&iid=010&rid=6128
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    References listed on IDEAS

    as
    1. Mr. Jaromir Benes & Mr. Papa M N'Diaye, 2004. "A Multivariate Filter for Measuring Potential Output and the NAIRU Application to the Czech Republic," IMF Working Papers 2004/045, International Monetary Fund.
    2. Mr. Tetsuya Konuki, 2008. "Estimating Potential Output and the Output Gap in Slovakia," IMF Working Papers 2008/275, International Monetary Fund.
    3. Francesca D'Auria & Cécile Denis & Karel Havik & Kieran Mc Morrow & Christophe Planas & Rafal Raciborski & Werner Roger & Alessandro Rossi, 2010. "The production function methodology for calculating potential growth rates and output gaps," European Economy - Economic Papers 2008 - 2015 420, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Gilles Mourre, 2009. "What explains the differences in income and labour utilisation and drives labour and economic growth in Europe? A GDP accounting perspective," European Economy - Economic Papers 2008 - 2015 354, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    production function; capital-to-output ratio; potential output; HP filter;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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