Growth, Technological Change and Output Gap in Russia

The present paper uses the “growth accounting” methodology to estimate technological change, in an attempt to formulate an explanation of Russia’s economic decline and signs of recovery in the 1992-1999 time span, in relation to technological change. Also, the potential output and output gap is estimated using a Cobb Douglas production function and a Hodrick-Prescott filter for the Russian Economy before 2000. The results do show that, despite the general economic collapse during the 1990s, rooted in the Soviet economy’s very structure, the level of technology has, practically, remained unchanged which, in turn, prevented the Russian Economy from further deteriorating. Meanwhile, the relationship between output gap and inflation is briefly examined and the results suggest that output gap is sufficient to explain the largest part of inflation in the Russian economy. As a final conclusion, technological progress and, consequently, long-term economic growth is linked to Russia’s political and structural development.