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Date

2014-07

ISSN

0161-8938

Published

2014-07

Author(s)

Burns, Andrew

van Rensburg, Theo Janse

Dybczak, Kamil

Bui, Trung

Abstract

This paper describes a parsimonious methodology employed by the World Bank for estimating potential output using the production function method. Despite the necessity of strong assumptions, sensitivity analysis suggests the reported estimates for 159 countries are robust to alternative specifications. Moreover, for the majority of countries estimated output gaps are positively correlated with inflation acceleration and negatively correlated with current account balances. An examination of estimated output gaps and post-crisis economic developments in several middle-income countries suggest that the methods can play a useful role in guiding macroeconomic policy.

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URI

http://hdl.handle.net/10986/20717

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http://www.sciencedirect.com/science/article/pii/S0161893814000519

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• Cited 4 times in Scopus (View citations)