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Estimation of Output Gap for Pakistan

Abdullah Tahir () and Waqas Ahmad ()
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Waqas Ahmad: State Bank of Pakistan

Authors registered in the RePEc Author Service: Waqas Ahmed

No 85, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: A comprehensive exercise is conducted for the estimation of potential output and output gap for Pakistan while considering shortcomings of existing relevant literature. A number of approaches, combining both state-space and structural estimation have been employed for this purpose. These include Bayesian inference, multivariate filter method, vector auto regression (with identification restrictions), state-space model and univariate filtering for estimation of output gap and potential output. The study finds fall in potential output growth of Pakistan during FY09 – FY13, has increased the economy’s vulnerability by making it more susceptible to demand shocks. Forecast of output gap on quarterly and annual frequencies for FY17 is also presented portraying upbeat aggregate demand going forward.

Keywords: State–Space Models; Potential Output; Output Gap. (search for similar items in EconPapers)
JEL-codes: C31 E10 E52 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2017-02
New Economics Papers: this item is included in nep-mac
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