ESTIMATING OUTPUT GAP AND POTENTIAL OUTPUT FOR RUSSIA AND ITS USEFULNESS BY FORECASTING INFLATION

Abstract

This paper deals with an estimation of output gap and potential output for Russian’s economy. Three methods of estimation have been used for estimating these two unobservable variables: Hodrick-Prescott filter, production function and SVAR model. All methods of estimation showed very similar course, although obtained values were not identical. Then obtained values of output gap were used to analyse the ability of output gap to forecast inflation. Two simple gap models were used for this purpose. Results showed that output gap could be used as useful indicator of inflation, according to all methods of estimation output gap.

Data:
Received: 19 Dec 2014
Revised: 2 Feb 2015
Accepted: 6 Mar 2015
Published: 20 Mar 2015