Albu, LucianLiviu (2006): A dynamic model to estimate the longrun trends in potential GDP.

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Abstract
To estimate longrun growth based on the socalled potential GDP became a constant preoccupation among economists. However, one remaining problem in every longrun growth model is to estimate a persistent trend in labour productivity outside of it, in order to avoid the implicit circular relationship between actual productivity growth and potential level of production. Coming from recent literature on natural rate of unemployment estimation we used a specific methodology in order to estimate NAIRU in case of postcommunist economies and based on it to evaluate the potential GDP. Taking into account that the “classic” HodrickPrescott method is in fact equivalent to an interpolation procedure, we used in our experiment other three filters demonstrating very similar output. Moreover, we conceived a simple autonomous model in order to estimate the growth of a socalled “pure” productivity independently from the actual level of employment and to compare its dynamics with that of natural rate of unemployment.
Item Type:  MPRA Paper 

Institution:  Institute for Economic Forecasting, Bucharest 
Original Title:  A dynamic model to estimate the longrun trends in potential GDP 
Language:  English 
Keywords:  natural rate of unemployment; potential GDP; pure productivity 
Subjects:  P  Economic Systems > P2  Socialist Systems and Transitional Economies > P24  National Income, Product, and Expenditure ; Money ; Inflation C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C13  Estimation: General E  Macroeconomics and Monetary Economics > E2  Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24  Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity D  Microeconomics > D5  General Equilibrium and Disequilibrium > D58  Computable and Other Applied General Equilibrium Models 
Item ID:  3708 
Depositing User:  Lucian Liviu Albu 
Date Deposited:  26. Jun 2007 
Last Modified:  08. Mar 2015 14:02 
References:  Albu, L.L. (1997): Strain and inflationunemployment relationship in transitional economies: a theoretical and empirical investigation, University of Leicester, Department of Economics, Centre for Economic Studies, Leicester, ACEPHARE, December. Albu, L.L. (2001): “Evolution of InflationUnemployment Relationship in the Perspective of Romania’s Accession to EU”, Romanian Journal of Economic Forecasting, 34, Bucharest, pp. 523. Albu, L.L. (2005): “Estimating natural unemployment in transitional economies (Case of Romania)”, in Adapted models to estimate potential GDP in the candidate countries, GDN research project, Prague, June. Ball, L. and Mankiw, G. (2002): “The NAIRU in Theory and Practice”, NBER Working Paper Series, 8940, National Bureau of Economic Research, Cambridge. Ball, L. and Moffitt, R. (2001): “Productivity Growth and the Phillips Curve”, in A. B. Krueger and R. Solow (eds.) The Roaring Nineties: Can Full Employment Be Sustained?, New York: The Russell Sage Foundation and The Century Foundation Press. Daianu, D. and Albu, L.L. (1996): Strain and the InflationUnemployment Relationship: A Conceptual and Empirical Investigation. Econometric Inference into the Macroeconomic Dynamics East European Economies, University of Leicester, UK. Research Memorandum, No. 96/15. Hodrick, R. and Prescott, E. (1997): “Postwar U.S. Business Cycles: An Empirical Investigation”, Journal of Money, Credit, and Banking, 29, pp. 116. Staiger, D., Stock, J.H., and Watson, M.W. (2001): “Prices, Wages, and the U.S. NAIRU in the 1990s”, in A. B. Krueger and R. Solow (eds.) The Roaring Nineties: Can Full Employment Be Sustained?, New York: The Russell Sage Foundation and The Century Foundation Press. 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/3708 