Recessions and Instable Estimates of Potential Output

Jonas Dovern

No 639, Working Papers from University of Heidelberg, Department of Economics

Abstract: This paper analyzes how the OECD revises potential output (PO) estimates after recessions. We show that downward revisions are substantial and mostly driven by supply shocks while PO estimates do not significantly react to demand shocks. In addition, revisions are partly caused by avoidable mismeasurement of PO before recessions. In particular, we show that the length of the preceding boom and pre-recession values of the current account balance and credit volumes are predictors of post-recession PO revisions. Our results call for improved methods for estimating PO and provide evidence against the existence of substantial hysteresis effects of demand shocks.

Keywords: potential output; trend; output gap; hysteresis; OECD (search for similar items in EconPapers)
Date: 2017-11-10
New Economics Papers: this item is included in nep-mac
Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://nbn-resolving.de/urn:nbn:de:bsz:16-heidok-237060 Frontdoor page on HeiDOK (text/html)
https://archiv.ub.uni-heidelberg.de/volltextserver ... Zuber_2017_dp639.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:awi:wpaper:0639

Access Statistics for this paper

More papers in Working Papers from University of Heidelberg, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Gabi Rauscher ( this e-mail address is bad, please contact ).