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Filling the gap- open economy considerations for more reliable potential output estimates

Zsolt Darvas () and András Simon

Working Papers from Bruegel

Abstract: Highlights This paper argues that the Phillips curve relationship is not sufficient to trace back the output gap, because the effect of excess demand is not symmetric across tradeable and non-tradeable sectors. In the non-tradeable sector, excess demand creates excess employment and inflation via the Phillips curve, while in the tradeable sector much of the excess demand is absorbed by the trade balance. We set up an unobserved-components model...

Date: 2015-10
New Economics Papers: this item is included in nep-eec and nep-mac
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Related works:
Working Paper: Filling the gap: open economy considerations for more reliable potential output estimates (2015) Downloads
Working Paper: Filling the gap: open economy considerations for more reliable potential output estimates (2015) Downloads
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