EconPapers    
Economics at your fingertips  
 

Estimating the Potential Output and Output Gap of Ghana

Joseph Atta-Mensah () and Sawuya Nakijoba

Applied Economics and Finance, 2019, vol. 6, issue 3, 58-70

Abstract: This paper focuses on the estimation of the potential output of Ghana. Potential output or its derivative the output gap are not observable. However, ¡°potential output¡± is a powerful conceptual tool that guides analysts and policymakers in gauging whether the current observed economic activity is sustainable and how much of it is greater than or less than potential. Based on Ghanaian GDP annual data from 1960 ¨C 2017, the paper estimates potential output and output gaps using the following methodology: linear time trends, Hodrick-Prescott (HP) filter trends, multivariate HP filter trends, and a production function model. The results show that estimates of the potential output and output gaps are model-dependent as estimates vary from one methodology to the other. The paper recommends that policymakers should not mechanically choose a model to estimate output gap. For the avoidance of costly policy mistakes, the choice of the model should be complemented with sound judgement based on a set of pertinent economic information.

Keywords: potential output; output gap; hodrick-prescott (HP) filter trends; multivariate HP; a production function model (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://redfame.com/journal/index.php/aef/article/view/3958/4384 (application/pdf)
http://redfame.com/journal/index.php/aef/article/view/3958 (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:rfa:aefjnl:v:6:y:2019:i:3:p:58-70

Access Statistics for this article

More articles in Applied Economics and Finance from Redfame publishing Contact information at EDIRC.
Bibliographic data for series maintained by Redfame publishing ().

 
Page updated 2020-04-28
Handle: RePEc:rfa:aefjnl:v:6:y:2019:i:3:p:58-70