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The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page The Use of Cyclical Indicators in Estimating the Output Gap in Japan
Jane Haltmaier
2001-701  (April 2001)

Abstract:  The paper uses capital and labor utilization rates to derive estimates of the Japanese output gap and potential output. Two techniques are used. The first uses the cyclical indicators to adjust potential output estimates derived from a Hodrick-Prescott filter over the most recent period when such estimates are generally considered to be unreliable. The second estimates equilibrium levels of the cyclical indicators and uses an Okunís Law-type relationship to derive output gaps and potential output. The second method is also applied to the components of potential output to derive a third estimate. These methods suggest that the current Japanese output gap is considerably larger than a simple Hodrick-Prescott filter would suggest.

Full paper (86 KB PDF)

potential output, output gap

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