A Revised Direct Output Gap Measure for the Turkish Economy

Evren Erdoğan Coşar

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: In the calculation of the output gap, which is an unobservable variable, filtering techniques, production function and structural models are used in general. However, the output gap estimates obtained using these methods may be subject to revisions due to the end-of-sample and model parameter revisions. To reduce the uncertainties in output gap estimates, it is important to follow indicators which are not predicted and contain information about the cyclical position of the economy. In this study we revised the direct output gap measure to cover the 2005-2017 period by including new cyclical indicators representing the different sectors of the economy. The results show that the revisions in the calculated output gap indicator are lower than the output gap series calculated by filter-based methods and that the revised output gap indicator contains more information about the phase of inflation and growth cycles than the old series. In addition, the calculated output gap indicators suggests that economic activity in Turkey was below its potential in the period 2016Q1-2017Q1 and 2009-2010.

Keywords: Output gap; Growth cycles; Indexation and weighting (search for similar items in EconPapers)
JEL-codes: C43 E32 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ara and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1804

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