Did the Crisis Affect Potential Output?

Makram El-Shagi

No 9/2010, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: Conventional Phillips-curve models that are used to estimate the output gap detect a substantial decline in potential output due to the present crisis. Using a multivariate state space model, we show that this result does not hold if the long run role of excess liquidity (that we estimate endogeneously) for inflation is taken into account.

Keywords: output gap; liquidity; state space models; Produktionslücke; Liquidität; Zustandsraummodelle (search for similar items in EconPapers)
JEL-codes: E3 E4 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:iwh-9-10

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