Potential Output and Output Gap in Central America, Panama and Dominican Republic

Christian Johnson

No 2013/145, IMF Working Papers from International Monetary Fund

Abstract: Potential Output is a key factor for debt sustaintability analysis and for developing strategies for growth, but unfortunately it is an unobservable variable. Using three methodologies (production function, switching, and state-space), this paper computes potential output for CAPDR countries using annual data. Main findings are: i) CAPDR potential growth is about 4.4 percent while output gap volatility is about 1.9 percent; ii) The highest-potential growth country is Panama (6.5 percent) while the lowest-growth country is El Salvador (2.6 percent); iii) CAPDR business cycle is about eigth years.

Keywords: WP; Potential growth; output gap; growth decomposition; switching; state-space model; output gap volatility; output gap-production function approach; output gap variability; standard deviation; CAPDR country; potential output gap; Potential output; Production growth; Sustainable growth; Total factor productivity; Central America (search for similar items in EconPapers)
Pages: 42
Date: 2013-06-12
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Citations: View citations in EconPapers (4)

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