Estimating Output Gap for Pakistan Economy:Structural and Statistical Approaches

Bukhari S. Adnan H. A. S. and Safdar Khan

MPRA Paper from University Library of Munich, Germany

Abstract: The objective of this study is to estimate potential output vis-à-vis output gap for Pakistan’s economy. This paper reviews six commonly used techniques to estimate potential output and from that the output gap. The results suggest that while measures of output gap are not identical they nonetheless do show some degree of association among each other. Therefore, a composite output gap is calculated for 1950 to 2007. The composite output gap depicts that Pakistan economy has been observing a cyclical episode of periods of excess supply followed by excess demand in the period of analysis. Furthermore, evidence suggests that Pakistan economy is currently experiencing rising demand pressures since FY05. These demand pressures show a high degree of correlation with the rising inflation as shown in the temporal correlation between inflation and composite of output gap measures.

Keywords: gross domestic product; potential output; output gap (search for similar items in EconPapers)
JEL-codes: C22 C53 E37 (search for similar items in EconPapers)
Date: 2008-04-06, Revised 2008-06-20
New Economics Papers: this item is included in nep-cwa and nep-mac
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Citations: View citations in EconPapers (5)

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https://mpra.ub.uni-muenchen.de/28573/1/MPRA_paper_28573.pdf revised version (application/pdf)

Related works:
Journal Article: Estimating Output Gap for Pakistan Economy: Structural and Statistical Approaches (2008)
Working Paper: Estimating Output Gap for Pakistan economy: Structural and Statistical Approaches (2008)
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