The Use of Cyclical Indicators in Estimating the Output Gap in Japan

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 es...

Full description

Saved in:
Bibliographic Details
Published in:Policy File 2001
Main Author: Haltmaier, Jane
Format: Report
Language:English
Subjects:
Economic policy
The Federal Reserve Board
Online Access:Request full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary: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 Okun's 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.