Potential output and output gap in Central America, Panama and Dominican Republic

Christian A. Johnson

Potential Output is a key factor for debt sustaintability analysis and for developing strategies for growth, but unfortunately it is an unobservable variable. Using three methodologies (production function, switching, and state-space), this paper computes potential output for CAPDR countries using annual data. Main findings are: i) CAPDR potential growth is about 4.4 percent while output gap volatility is about 1.9 percent; ii) The highest-potential growth country is Panama (6.5 percent) while the lowest-growth country is El Salvador (2.6 percent); iii) CAPDR business cycle is about eigth years

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Year of publication:	2013
Authors:	Johnson, Christian
Publisher:	Washington, DC : IMF
Subject:	Produktionspotenzial \| Potential output \| Mittelamerika \| Central America \| Panama \| Dominikanische Republik \| Dominican Republic

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Extent:	Online-Ressource (41 S.) graph. Darst.
Series:	IMF working papers. - Washington, DC : IMF, ZDB-ID 2108494-4. - Vol. 13/145
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Description based upon print version of record Systemvoraussetzungen: Acrobat Reader Cover; Abstract; Contents; I. Introduction; II. The Production Function Approach; A. Empirical Results for the TFP Approach; Tables; Table 1. CAPDR Growth Decomposition: Contributions and Stylized Facts; Figures; Figure 1. CAPDR: Capital, Labor and Productivity Contribution to Growth; B. Computing the Output Gap; C. Empirical Results: TFP Vis-à-vis HP; Figure 2. CAPDR and US Output Gaps: Cycles and Correlation; Figure 3. CAPDR: Potential Output and Output Gap-Production Function Approach; Figure 4. CAPDR: Potential Output and Output Gap-HP Filter; III. Switching Model A. Application to CAPDR: Identifying Potential Growth and Output Gap VolatilityTable 2. Switching Model: Three States for the Economy; Figure 5. Mixture and Density Functions for each State of the Economy: CAPDR; B. Identifying Conditional Probabilities; C. Conditional Probabilities and Cycle Indicator Function; Figure 6. CAPDR: Probabilities for each Scenario and Heat Map-Switching Model; Figure 7. CAPDR: Potential Output and Output Gap-Switching Model; IV. State-Space Models; A. Model I: Deterministic Drift; B. Model II: Drift with Mean Reversion; C. Estimation and Empirical Results Table 3. Relation between Growth and Volatility: State-Space ModelsFigure 8. CAPDR: Potential Output and Output Gap-State-Space Model; V. Summary of the Models; Table 4. Three Approaches: Growth and Output Gap Volatilities in CAPDR; Figure 9. Potential Growth: average of the three methodologies; Figure 10. CAPDR: Potential Growth across Models; Figure 11. CAPDR: Output Gap Volatilities across Models; VI. Conclusions; Appendix; A. Switching Model: Gauss Code; B. State-Space Model: Gauss Code; C. Optimal Lambda using the Pedersen (2001, 2002) Method: Nicaragua Figure 12. Q Loss Function and Optimal LambdaReferences
ISBN:	978-1-4843-2220-8
Other identifiers:	10.5089/9781484322208.001 [DOI]
Source:	ECONIS - Online Catalogue of the ZBW

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