Measuring the Output Gap and Its Influence on the Import Surplus

Yigal Menashe () and Yosef Mealem
Additional contact information
Yigal Menashe: Bank of Israel
Yosef Mealem: Bank of Israel

No 2000.04, Bank of Israel Working Papers from Bank of Israel

Abstract: In this paper, we measure the output gap which is calculated both annually and quarterly for the period 1986-1999, and its influence on the import surplus. Analysis of the output gap's cyclical components - the deviation in private sector labor input and the deviation in productivity and capital utilization – shows that the output gap during the years 1997-1999 reflected both the increase in unemployment and low rates of productivity or capital utilization. The annual data indicate that potential output and actual private sector output grew at an average rate of 6-7 percent during the first half of the 90s. In following years, potential output grew at a more moderate rate of 4-5 percent. The results show a positive relationship between the output gap and the import surplus, which can be explained if we view the output gap as a proxy for surplus demand. Thus, a negative output gap reflects a negative demand surplus which can arise in the short run through a decrease in local demand, as occurred in the slowdown of 1997-1999. This decrease will result in a drop in the relative prices of local products which will, to a certain extent, lead to increased local production and a decrease in the import surplus. This positive relationship is maintained even when taking into account the positive influence of immigration on imports in the regression equation.

Pages: 26 pages
Date: 2000-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_2000.04.pdf First version, 2000 (application/pdf)

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:boi:wpaper:2000.04

Access Statistics for this paper

More papers in Bank of Israel Working Papers from Bank of Israel Contact information at EDIRC.
Bibliographic data for series maintained by Yossi Yakhin ().