Posted

June 13, 2011 10:48:31 PM

Date

2011-06

Author

Igor Vetlov, Tibor Hlédik, Magnus Jonsson, Henrik Kucsera, and Massimiliano Pisani

Affiliation

Bank of Lithuania, Czech National Bank, Sveriges Riksbank, Magyar Nemzeti Bank, Banca d'Italia

Title

Potential Output in DSGE Models

Summary /
Abstract

In view of the increasing use of Dynamic Stochastic General Equilibrium (DSGE) models in the macroeconomic projections and the policy process, this paper examines, both conceptually and empirically, alternative notions of potential output within DSGE models. Furthermore, it provides historical estimates of potential output/output gaps on the basis of selected DSGE models developed by the European System of Central Banks’ staff. These estimates are compared to the corresponding estimates obtained applying more traditional methods. Finally, the paper assesses the usefulness of the DSGE model-based output gaps for gauging inflationary pressures.

Keywords

Potential output, simulation and forecasting models, monetary policy

URL

http://d.repec.org/n?u=RePEc:lie:wpaper:9&r=mac

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