Is there hysteresis in potential output estimates?

Julián Roa Rozo

Economics Letters, 2024, vol. 234, issue C

Abstract: Using an error correction model, this paper studies the dynamics of GDP and potential GDP using OECD's Economic Outlook and IMF's World Economic Outlook estimates of the output gap. The findings suggest the presence of hysteresis, implying that short-run shocks to GDP have sizeable permanent effects on potential GDP.

Keywords: Hysteresis; Business cycle; Potential GDP (search for similar items in EconPapers)
JEL-codes: E32 E37 E47 E58 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523004925

DOI: 10.1016/j.econlet.2023.111466

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