Recessions and instable estimates of potential output
This paper analyzes how the OECD revises potential output (PO) estimates after recessions. We show that downward revisions are substantial and mostly driven by supply shocks while PO estimates do not significantly react to demand shocks. In addition, revisions are partly caused by avoidable mismeasu...
Saved in:
| Main Authors: | , |
|---|---|
| Format: | Book/Monograph Working Paper |
| Language: | English |
| Published: |
Heidelberg
University of Heidelberg
November 7, 2017
|
| Series: | Discussion paper series / University of Heidelberg, Department of Economics
no. 639 |
| In: |
Discussion paper series (no. 639)
|
| DOI: | 10.11588/heidok.00023706 |
| Subjects: | |
| Online Access: | Resolving-System, kostenfrei, Volltext: http://dx.doi.org/10.11588/heidok.00023706 Resolving-System, kostenfrei, Volltext: http://nbn-resolving.de/urn:nbn:de:bsz:16-heidok-237060 Verlag, kostenfrei, Volltext: http://www.uni-heidelberg.de/md/awi/forschung/deseminar/dp__639_dovern_zuber.pdf Resolving-System, kostenfrei, Volltext: http://hdl.handle.net/10419/179268 
|
| Author Notes: | Jonas Dovern and Christopher Zuber |
| Summary: | This paper analyzes how the OECD revises potential output (PO) estimates after recessions. We show that downward revisions are substantial and mostly driven by supply shocks while PO estimates do not significantly react to demand shocks. In addition, revisions are partly caused by avoidable mismeasurement of PO before recessions. In particular, we show that the length of the preceding boom and pre-recession values of the current account balance and credit volumes are predictors of post-recession PO revisions. Our results call for improved methods for estimating PO and provide evidence against the existence of substantial hysteresis effects of demand shocks. |
|---|---|
| Physical Description: | Online Resource |
| DOI: | 10.11588/heidok.00023706 |