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Topic: Potential output

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Production theory basics

Aggregate demand

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	The Effects of a Booming Economy on the U.S. Trade Deficit - Federal Reserve Bank of New York (Site not responding. Last check: 2007-10-13)
		We define the potential output trade balance as the trade balance that would occur if the United States and its trading partners were at potential output, all else equal.
		Note that the relationship of the potential output trade balance to the actual trade balance will depend on the deviations of the United States' and its major trading partners' actual output from potential output and on their respective import demand elasticities.
		The U.S. potential output growth rate is now estimated to exceed 4 percent (see, for example, Standard and Poor's DRI December 2000 forecast of GDP growth and the GDP gap).
	www.ny.frb.org /research/current_issues/ci7-2/ci7-2.html (4131 words)

	Potential output - Wikipedia, the free encyclopedia
		In economics, potential output (also referred to as "natural real gross domestic product") refers to the highest level of real Gross Domestic Product output that can be sustained over the long term.
		Potential output in macroeconomics corresponds to one point on the production possibilities frontier (or curve) for a society as a whole seen in introductory economics, reflecting natural, technological, and institutional constraints.
		Potential output has also been called the "natural gross domestic product." If the economy is at potential, the unemployment rate equals the NAIRU or the "natural rate of unemployment."
	en.wikipedia.org /wiki/Potential_output (300 words)

	[No title]
		The level of potential output, EMBED Equation.3 , is solved implicitly from: EMBED Equation.3 Log-linearizing the equation and rearranging yields: EMBED Equation.3 EMBED Equation.3 (10) where, EMBED Equation.3 is a shock term.
		My intuition is that since this paper demonstrates that potential output improves the inflation-output gap trade-off, the task of the monetary authority, which trades off inflation and output gaps is facilitated if they target potential output, as well as the inflation fluctuations and the output gaps.
		Potential output plays a role in the analysis only to the extent that it is needed to measure the output gap.
	www.tau.ac.il /~razin/Razinpotentialoutput.doc (3595 words)

	Background Paper: A Summary of Alternative Methods for Estimating Potential GDP (via CobWeb/3.1 ... (Site not responding. Last check: 2007-10-13)
		Potential output is an estimate of "full-employment" gross domestic product, or the level of GDP attainable when the economy is operating at a high rate of resource use.
		Finally, potential output is an important input in computing the standardized-budget surplus or deficit, which CBO uses to evaluate the stance of fiscal policy.
		Potential output calculated with a growth model is a useful concept for gauging the economy's productive capacity and offers the best basis for projecting GDP over the 10-year horizon required by the budget process.
	www.cbo.gov.cob-web.org:8888 /showdoc.cfm?index=5191&sequence=0 (3415 words)

	Potential output (via CobWeb/3.1 planetlab2.netlab.uky.edu) (Site not responding. Last check: 2007-10-13)
		In economics, potential output (also refered to as "natural gross domestic product") refers to the highest level of real Gross Domestic Product output that can be sustained over the long term.
		Potential output in macroeconomics corresponds to one point on the production possibilities frontier (or curve) for a society as a whole seen in introductory economics, reflecting natural, technological, and institutional contraints.
		Potential output has also been called the "natural gross domestic product." If the economy is at potential, the unemployment rate equals the NAIRU or the "natural rate of unemployment." Generally speaking, most central banks and other economic planning agencies attempt to keep GDP at or around natural GDP level.
	potential-output.iqnaut.net.cob-web.org:8888 (279 words)

	SSRN-Endogenous Monetary Policy with Unobserved Potential Output by Alex Cukierman, Francesco Lippi
		This Paper characterizes endogenous monetary policy when policymakers are uncertain about the extent to which movements in output and inflation are due to changes in potential output or to cyclical demand and cost shocks.
		Errors in forecasting potential output and the output gap are generally serially correlated.
		The increase in the Fed's conservativeness between the seventies and the nineties, and a more realistic appreciation of the uncertainties surrounding potential output in the second period, imply that the IP problem had a stronger impact in the seventies than in the nineties.
	papers.ssrn.com /sol3/papers.cfm?abstract_id=387904 (494 words)

	CBO's Method for Estimating Potential Output: An Update (Site not responding. Last check: 2007-10-13)
		Potential output--the trend growth in the productive capacity of the economy--is an estimate of the level of GDP attainable when the economy is operating at a high rate of resource use.
		Potential output in the nonfarm business sector is projected using equation (3a), the same production function used to estimate historical values for that variable.
		CBO's estimates of actual and potential output and the GDP gap since 1950 are shown in Table 1, along with projections of those variables through 2011.
	www.cbo.gov /showdoc.cfm?index=3020&sequence=0 (11597 words)

	Where irrigation matters
		Full exploitation of potential irrigable land increases the gross extent of suitable land (VS+S+MS) for cereals by 6 to 9 percent [2] for the world as a whole over, and above the land potentially suitable for rain-fed cereal production.
		In another 11 percent of gross suitable areas, potential output would increase with irrigation between 20 and 50 percent.
		On the other hand, the potential contribution from irrigation is particular important in impact classes 4 and 5.
	www.fao.org /ag/AGL/agll/gaez/results/5_4_3.htm (751 words)

	Potential output, output gaps and structural budget balances (Site not responding. Last check: 2007-10-13)
		This paper reviews the methods used for estimating potential output in OECD countries and the use of the resulting output gaps for the calculation of structural budget balances.
		The "split time trend" method for estimating trend output that was previously used for calculating structural budget balances is compared with two alternative methods, smoothing real GDP using a Hodrick Prescott filter and estimating potential output using a production function approach.
		It is concluded that the production function approach for estimating potential output provides the best method for estimating output gaps and for calculating structural budget balances.
	www.oecd.org /LongAbstract/0,2546,en_2649_33733_33928809_1_1_1_37443,00.html (189 words)

	APPENDIX II - CAPACITY OUTPUT AND CAPACITY UTILIZATION
		Capacity utilization is defined as the ratio of actual output to some measure of potential output given a firm’s short-run stock of capital and perhaps other fixed inputs in the short run (Nelson, 1989).
		The four measures differ by the manner in which potential or capacity output is defined and whether or not the potential or capacity output is technologically determined, without an explicit economic foundation, or whether this capacity output represents the outcome of an explicit economic optimization process, such as cost minimization or profit maximization.
		The first economic approach, proposed by Klein (1960) and Friedman (1963), defines capacity output as that output corresponding to the tangency of the long and short-run average or unit total cost curves (the average total cost curve includes the cost of the capital stock which is a fixed or quasi-fixed factor).
	www.fao.org /DOCREP/003/X2250E/x2250e0d.htm (1653 words)

	Tutor2u - the output gap
		The output gap is used in assessing the degree of demand-pull inflationary pressure in the economy at a particular time.
		It is important to note that a negative output gap does not tell us what the rate of inflation is going to be – merely it suggests the direction in which inflation is likely to move.
		The output gap is the difference between the actual level of national output and its potential level, usually expressed as a percentage of the level of potential output.
	www.tutor2u.net /economics/content/topics/macroeconomy/outputgap.htm (738 words)

	[No title]
		Output has fallen by 40 to 50 percent.
		As they struggle to create new institutional structures, past data are meaningless.¡&"¶"¶ª Øó¨Debates About Potential Outputª ¨¿Knowing potential output is crucial in knowing what policy to advocate.
		According to real business cycle economists, the best estimate of potential output is the actual income in the economy.¡(ÀUMª Àó‘¨Debates About Potential Outputª ¨aTheir Classical supply-side explanation is called real business cycle theory.
	www.suu.edu /faculty/tufte/ECON2020/Chap009x.ppt (229 words)

	Potential output in the seven major OECD countries (Site not responding. Last check: 2007-10-13)
		Potential output in the seven major OECD countries
		This paper outlines the concepts and methods used by the OECD Secretariat to derive estimates of potential output and capacity utlisation for the major seven countries.
		While there are many alternative definitions of potential output, the one which is currenty being used by the OECD Secretariat refers tot he level of output that is consistent over the medium-term with stable inflation.
	www.oecd.org /LongAbstract/0,2546,en_2649_34575_2002351_1_1_1_37419,00.html (162 words)

	Potential GNP: Its Measurement and Significance -- A Dissenting Opinion (Site not responding. Last check: 2007-10-13)
		This paper points out some of the econometric and conceptual difficulties with defining and measruing "potential output." Most efforts to estimate potential output, including the paper by Perloff and Wachter, are essentially trend extrapolation of output.
		Approaches differ concerning whether the trend line should pass through the peaks of past output (as Okun's approach implies when the "full-employment" unemployment rate is set equal to 4 percent) or through the middle of past output (as impleid by Perloff and Wachter).
		The former approach produces an "output gap" that is always positive, implying continual need for stimulative government policies.
	schwert.ssb.rochester.edu /crc79_dissent.htm (188 words)

	November Economic Trends: The Economy in Perspective (Site not responding. Last check: 2007-10-13)
		Keynesian economists in the 1960s thought that potential output changed very slowly, and that its value could be closely pinpointed.
		Contemporary macroeconomic theorists teach that monetary policy does not affect the economy’s level of potential output and cannot be relied on to keep output moving along a predetermined path.
		Even though history has shown repeatedly that estimates of potential output are unreliable, when the next generation of economists and policymakers arrive on the scene they inevitably push—or get pushed—to create inflation.
	www.clevelandfed.org /research/Et96/1196/eip.htm (778 words)

	About Forecast Icing Potential (FIP) (Site not responding. Last check: 2007-10-13)
		The FIP examines numerical weather prediction model output to calculate the potential for in-flight aircraft icing conditions.
		This icing potential demonstrates the confidence that an atmospheric location, represented by a three-dimensional model grid box, will contain supercooled liquid water that is likely to form ice on an aircraft.
		The FIP uses output from the 20-km Rapid Update Cycle hybrid B model (RUC), which is run hourly at the National Center for Environmental Prediction and generates forecasts with one-hour granularity out to three hours.
	aviationweather.gov /exp/fip/info.shtml (874 words)

	Measuring Potential Output and Output Gap and Macroeconomic Policy: The Case of Kenya (via CobWeb/3.1 ... (Site not responding. Last check: 2007-10-13)
		Measuring the level of an economy.s potential output and output gap are essential in identifying a sustainable non-inflationary growth and assessing appropriate macroeconomic policies.
		The estimation of potential output helps to determine the pace of sustainable growth while output gap estimates provide a key benchmark against which to assess inflationary or disinflationary pressures suggesting when to tighten or ease monetary policies.
		The estimated potential output growth using different methods gave a range of.2.9 to 2.4 percent for 2000 and a range of.0.8 to 4.6 for 2001.
	ideas.repec.org.cob-web.org:8888 /p/uct/uconnp/2005-45.html (880 words)

	Uncertain Potential Output: Implications for Monetary Policy
		This paper uses a small, calibrated forward-looking model of the euro-area economy to investigate the implications of incomplete information about potential output for the conduct and the design of monetary policy.
		In both cases, incomplete information about potential output leads to very persistent deviations between the actual and the perceived output gap in response to supply and cost-push shocks.
		Third, the implications of potential output uncertainty for the optimal delegation to an independent central bank are examined.
	ideas.repec.org /p/sce/scecf1/8.html (1021 words)

	Potential output - Topic Index - Publications and Research - Bank of Canada (via CobWeb/3.1 planetlab2.netlab.uky.edu) (Site not responding. Last check: 2007-10-13)
		Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada
		A Comparison of Alternative Methodologies for Estimating Potential Output and the Output Gap
		Estimating and Projecting Potential Output Using Structural VAR Methodology: The Case of the Mexican Economy
	www.bankofcanada.ca.cob-web.org:8888 /en/topic/top-poo.html (222 words)

	EconPapers: Endogenous Monetary Policy with Unobserved Potential Output
		Abstract: This paper characterizes endogenous monetary policy when policymakers are uncertain about the extent to which movements in output and inflation are due to changes in potential output or to cyclical demand and cost shocks.
		Journal Article: Endogenous monetary policy with unobserved potential output (2005)
		This item may be available elsewhere in EconPapers: Search for items with the same title.
	econpapers.repec.org /paper/rtvceisrp/26.htm (338 words)

	Efficient simple policy rules and the implications of potential output uncertainty (via CobWeb/3.1 ... (Site not responding. Last check: 2007-10-13)
		Efficient simple policy rules and the implications of potential output uncertainty
		"Efficient simple policy rules and the implications of potential output uncertainty," Reserve Bank of New Zealand Discussion Paper Series G99/5, Reserve Bank of New Zealand.
		"Inflation-adjusted potential output," International Finance Discussion Papers 561, Board of Governors of the Federal Reserve System (U.S.).
	ideas.repec.org.cob-web.org:8888 /a/eee/jebusi/v52y2000i1-2p143-160.html (1181 words)

	World Food Grains Output Potential Falls
		The immediate circumstances for such a large swing in the crop (Winter wheat, the predominant U.S. type planted in the Fall), include prolonged drought in western Kansas, harvest-time storms in central Kansas, and other "natural" factors.
		However, the reason for this occurrence is not at all Mother Nature, but rather, the combined impact of decades of policies undermining reliable, secure farm output, both here in the U.S. Grain Belt, and in other granary regions of the world, from Argentina to France, Australia, the Canadian Prairie Provinces, Russia, and so on.
		Lack of infrastructure, refusal to rebuild or extend infrastructure;
	www.larouchepub.com /other/2004/3129world_grains.html (655 words)

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