Measures of the Output Gap in Turkey: An Empirical Assessment of Selected Methods

İlyas Şıklar* and Suzan Şahin
Additional contact information
İlyas Şıklar*: Anadolu University, Department of Economics, Turkey
Suzan Åžahin: Anadolu University, Department of Economics, Turkey

International Journal of Economics and Financial Research, 2019, vol. 5, issue 11, 238-251

Abstract: The output gap indicating the difference between the actual and potential levels of output is a critical factor for estimating the inflationary pressures in an economy. If the main target of a central bank is ensuring and maintaining the price stability, estimating the output gap with a minimum error is crucial for the efficiency of the monetary policy. In this study, we estimated the output gap in Turkey for the 2002-2014 period by using four different methods. Two of these estimation methods are purely statistical (Linear Trend and Hodrick-Presscot (HP) Filtering) while the others are integrated with the relations suggested by the economic theory (multivariate structural model and structural autoregressive (SVAR) model). By using empirical decision criteria common in the literature, we conclude that SVAR model produces the most reliable output gap estimates to explain inflationary pressures in Turkey. However, we also found that the Hodrick-Presscot filtering method is the second best methodology in the output gap estimation process.

Keywords: Output gap; Potential GDP; HP filter; SVAR model; Linear trend model; Multivariate structural model. (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.arpgweb.com/pdf-files/ijefr5(11)238-251.pdf (application/pdf)
https://www.arpgweb.com/journal/5/archive/11-2019/11/5 (text/html)

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:arp:ijefrr:2019:p:238-251

Access Statistics for this article

International Journal of Economics and Financial Research is currently edited by Dr. Abu Hassan Bin Md Isa

More articles in International Journal of Economics and Financial Research from Academic Research Publishing Group Rahim Yar Khan 64200, Punjab, Pakistan.
Bibliographic data for series maintained by Managing Editor ().