Potential Output in DSGE Models

Igor Vetlov, Tibor Hlédik (), Magnus Jonsson (), Henrik Kucsera () and Massimiliano Pisani
Additional contact information
Tibor Hlédik: Czech National Bank
Magnus Jonsson: Sveriges Riksbank
Henrik Kucsera: Magyar Nemzeti Bank

No 9, Bank of Lithuania Working Paper Series from Bank of Lithuania

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 (search for similar items in EconPapers)
JEL-codes: E32 E37 E52 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2011-06-03
New Economics Papers: this item is included in nep-cba, nep-cmp, nep-dge, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

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Working Paper: Potential output in DSGE models (2011)
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