The Impact of Financial Factors on the Output Gap and Estimates of Potential Output Growth

Jesus Felipe (), Noli Sotocinal and Connie Bayudan-Dacuycuy

No 457, ADB Economics Working Paper Series from Asian Development Bank

Abstract: The literature on the finance–growth nexus highlights the importance of the financial cycle for the estimation of potential output of an economy. We estimate potential output growth for the G-5 countries, as well as for 10 high- and middle-income Asian economies, using a multivariate model that includes financial factors. We find that the latter have a positive and statistically significant effect on the output gap of the G-5 and high-income Asian economies, but not on that of the middle-income Asian economies. We also find that average potential growth of the economies included in the study is lower in 2008–2014 than in 2000–2007.

Keywords: economic growth; financial factors; output gaps; potential output growth (search for similar items in EconPapers)
JEL-codes: E32 G00 O11 O16 O47 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2015-10-07
New Economics Papers: this item is included in nep-fdg, nep-mac and nep-sea
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0457

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