UNOBSERVED COMPONENTS METHODS TO ESTIMATE POTENTIAL GDP (THE CASE OF ROMANIA)

The estimation of potential output gap is useful for the identification of a sustainable growth rate without inflationary pressures. In order to derive the potential output decomposition statistical methods and structural relationships estimation methods are used. The former tries to separate a series into a permanent and a cyclical component, and the latter tries to isolate the structural and cyclical influences upon the aggregate output using the economic theory. In order to estimate the potential GDP for the Romanian economy I applied only models with unobserved components.