Estimating Sustainable Output Growth in Emerging Market Economies

Abstract

We present a model that incorporates the information contained in diverse variables when estimating sustainable output growth. For this purpose, we specify a statespace model representing a multivariate HP filter that links cyclical fluctuation in GDP with several indicators of macroeconomic imbalances. We obtain the parameterizetion of the model by estimating it over a cross-section of emerging market economies. We show that the trend output growth rates estimated by using this model are more stable than those obtained with a univariate version of the filter and thus are more consistent with the notion of sustainable output.

Semi-Structural VAR and Unobserved Components Models to Estimate Finance-Neutral Output Gap

“…2 Following Borio et al (2017), several subsequent papers adopt the same (or very similar) methodology to recover the "sustainable growth" and the "finance-neutral output gap" (see e.g. Anvari et al (2014); Odor and Kucserova (2014); Felipe et al (2015); Krupkina et al (2015); Maliszewski and Zhang (2015); Berger et al (2015); Alberola-Ila et al (2016); Amador-Torres et al (2016); Grintzalis et al (2017)). Bernhofer et al (2014) adopt a more general statistical filtering technique proposed by Harvey and Jaeger (1993) to estimate the finance neutral output gap for several advanced and emerging EU countries.…”