Potential output in DSGE models

Igor Vetlov, Massimiliano Pisani, Tibor Hlédik, Magnus Jonsson and Henrik Kucsera

No 1351, Working Paper Series from European Central Bank

Abstract: In view of the increasing use of Dynamic Stochastic General Equilibrium (DSGE) models in the macroeconomic projections and the policy process, this paper examines, both conceptually and empirically, alternative notions of potential output within DSGE models. Furthermore, it provides historical estimates of potential output/output gaps on the basis of selected DSGE models developed by the European System of Central Banks’ staff. These estimates are compared to the corresponding estimates obtained applying more traditional methods. Finally, the paper assesses the usefulness of the DSGE model-based output gaps for gauging inflationary pressures. JEL Classification: E32, E37, E52

Keywords: monetary policy; potential output; simulation and forecasting models (search for similar items in EconPapers)
Date: 2011-06
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
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Citations: View citations in EconPapers (41)

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Related works:
Working Paper: Potential Output in DSGE Models (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20111351

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