Minding the Output Gap: A Hamilton Filter Approach and Updated Estimates for the Brazilian Economy
This paper develops an alternative approach for estimating the potential output and the output gap, intending to serve as a good balance between a simple low data requiring method and a powerful but complex structural approach. We rely on the Hamiltons Regression Filter properties to generate a statistically robust estimator of the potential Gross Domestic Product level which overcomes the problems associated to the Hodrick-Prescott filter and improves the Production Function Approach (PFA). Furthermore, we use this methodology to update the estimates of the potential output and output gap for the Brazilian economy.
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| Language: | English |
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Inter-American Development Bank
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| Subjects: | Economy, Development Bank, Potential Output, Output Gap, Gross Domestic Product, Inflation, Debtor Finance, Fiscal Policy, C53 - Forecasting and Prediction Methods • Simulation Methods, C45 - Neural Networks and Related Topics, E17 - Forecasting and Simulation: Models and Applications, Macroeconometrics;Output gap;Potential output;GDP;Brazil, |
| Online Access: | http://dx.doi.org/10.18235/0004981 https://publications.iadb.org/en/minding-output-gap-hamilton-filter-approach-and-updated-estimates-brazilian-economy |
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| Summary: | This paper develops an alternative approach for estimating the potential output and the output gap, intending to serve as a good balance between a simple low data requiring method and a powerful but complex structural approach. We rely on the Hamiltons Regression Filter properties to generate a statistically robust estimator of the potential Gross Domestic Product level which overcomes the problems associated to the Hodrick-Prescott filter and improves the Production Function Approach (PFA). Furthermore, we use this methodology to update the estimates of the potential output and output gap for the Brazilian economy. |
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