Abstract
In this paper, we calculate the potential output and the output gap using a Bayesian-estimated DSGE model of Japan's economy. For bridging the gap with conventional measures, we define our measure of potential output as a component of the efficient output generated only by persistent growth rate shocks. Our potential growth displays a high degree of smoothness and moves closely with conventional measures. Moreover, the output gap from our measure of potential output shows better forecasting performance for inflation-in particular, at short horizons-than other measures of output gap.
Authors
- Takuji Fueki
- Ichiro Fukunaga
- Hibiki Ichiue
- Toyoichiro Shirota
JEL codes
- E32
- E37
- O41
- O47