Measuring potential growth with an estimated DSGE model of Japan’s economy

Takuji Fueki, Ichiro Fukunaga, Hibiki Ichiue, Toyoichiro Shirota

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)1-32
Number of pages32
JournalInternational Journal of Central Banking
Volume12
Issue number1
Publication statusPublished - 2016 Mar
Externally publishedYes

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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