The Cyclical Sensitivity in Estimates of Potential Output

Olivier Coibion, Yuriy Gorodnichenko and Mauricio Ulate

Department of Economics, Working Paper Series from Department of Economics, Institute for Business and Economic Research, UC Berkeley

Abstract: The fact that declines in output since the Great Recession have been parlayed into equivalent declines in measures of potential output is commonly interpreted as implying that output will not return to previous trends. We show that real-time estimates of potential output for the United States and other countries respond gradually and similarly to both transitory and permanent shocks to output. Observing revisions in measures of potential output therefore tells us little about whether changes in actual output will be permanent. Some alternative methodologies to estimate potential output can avoid these shortcomings. These approaches suggest a much more limited decline in potential output since the Great Recession.

Keywords: Applied Economics; Economics (search for similar items in EconPapers)
Date: 2018-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
https://www.escholarship.org/uc/item/0r16570h.pdf;origin=repeccitec (application/pdf)

Related works:
Journal Article: The Cyclical Sensitivity in Estimates of Potential Output (2018)
Working Paper: The Cyclical Sensitivity in Estimates of Potential Output (2017)
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:cdl:econwp:qt0r16570h

Access Statistics for this paper

More papers in Department of Economics, Working Paper Series from Department of Economics, Institute for Business and Economic Research, UC Berkeley Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().