Dobrescu, Emilian (2004): Double conditioned potential output. Published in: Romanian Journal of Economic Forecasting No. Paper presented at the 28th General Conference of The International Association for Research in Income and Wealth Cork, Ireland, August 22  28, 2004

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Abstract
The central point of this paper is that both  internal and external  equilibria ought to be involved in the estimation of potential output. If only the data on inflation, unemployment rate and wages are used for its evaluation, no certainty exists that such a level will correspond to a stable foreign trade balance. Our attempt is based on the following methodological assumptions: • the potential output is concomitantly associated with a constant inflation and sustainable relative foreign trade balance (ratio of net export to gross domestic product); • all supply shocks affect this level, potential output being, therefore, a variable indicator; • consequently, the output gap reflects exclusively the demand pressure. The proposed computational algorithm comprises utilisation of orthogonal regression. It is exemplified on seasonally adjusted quarterly statistical series of the Romanian transition economy; this application shows that the output gap really contains significant regular and irregular cyclical components.
Item Type:  MPRA Paper 

Original Title:  Double conditioned potential output 
Language:  English 
Keywords:  Potential Output, Output Gap, Orthogonal Regression, Cycle 
Subjects:  E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E32  Business Fluctuations; Cycles C  Mathematical and Quantitative Methods > C2  Single Equation Models; Single Variables > C22  TimeSeries Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models 
Item ID:  35769 
Depositing User:  Emilian Dobrescu 
Date Deposited:  06. Jan 2012 21:13 
Last Modified:  13. Feb 2013 14:23 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/35769 