Minding the Output Gap: A Hamilton Filter Approach and Updated Estimates for the Brazilian Economy
Date
Jun 2023
This paper develops an alternative approach for estimating the potential output and the output gap, intending to serve as a good balance between a simple low data requiring method and a powerful but complex structural approach. We rely on the Hamiltons Regression Filter properties to generate a statistically robust estimator of the potential Gross Domestic Product level which overcomes the problems associated to the Hodrick-Prescott filter and improves the Production Function Approach (PFA). Furthermore, we use this methodology to update the estimates of the potential output and output gap for the Brazilian economy.