The Usefulness of Output Gaps for Policy Analysis

Koske, Isabell; Pain, Nigel

doi:10.1787/241172520210

Cited by 22 publications

(1 citation statement)

References 55 publications

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“…The output gap is considered as a key indicator of the business cycle definition in scientific and practical literature. The contemporary domestic and foreign scientists like Kuttner (1994), Furceri and Mourougane (2012), Zatonatska and Stavytskyy (2009), Hodrick (1997), Mishkin (2007), De Masi (1997), Prescott (1986) and other made significant efforts to assess the potential GDP, some of them like Franceasca et al (2010), Henroit (1997), De Jager and Smal (1984), William (2002), Hunt and Conway (1997), Koske and Pain (2008), Giorno et al (1995), Tosetto (2008), Gavin (2012), Dupasquier et al (1997), and others used the approach of production function for the study. Thus, Kuttner (1994) proposed a new method for estimating potential output in which potential real GDP is modelled as an unobserved stochastic trend and deviations of GDP from potential affect inflation through an aggregate supply relationship.…”

Section: Literature Reviewmentioning

confidence: 99%

Economic modeling of the GDP gap in Ukraine and worldwide

Kharlamova

Stavytskyy

Chernyak

et al. 2019

Problems and Perspectives in Management

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ActualityThe concept of output gap plays an important role in traditional macroeconomic theory, applied research and monetary policy. GoalThe paper reveals analyses of the potential economic development in Ukraine and in some countries of the world under limited information. Thus, the practical goal is to consider the best modelling approach for the possibility to regulate GDP in Ukraine, as it has been experienced in other countries of the world. MethodThe research is realized with the help of economic-mathematical modelling of GDP gap based on the analysis of the production function, statistical methods of distinguishing the trend component, one-dimensional filtration, multidimensional filtration. ResultsPractical importance of the paper includes implementation of methods for estimating potential GDP and the GDP gap, in particular, the authors proposed to use an approach based on the production function for the potential growth of European countries modelling. The model reveals that for the Eurozone countries, in the short term, it is not expected that the economy will reach its potential level. The negative forecast is explained by the fact that the Eurozone has been severely affected by the debt crisis. There has been a significant increase in the gap in production volumes, which in turn led to deflation. Despite the uncertainty in the assessment of potential GDP and GDP gap for Ukraine the multidimensional method provided the best modelling result. Thus, it is disclosed that Ukraine is under the growing wave of the business cycle, but not in the synergy with the EU dynamics.

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