Chapter

II IMF Estimates of Potential Output: Theory and Practice

Author(s):
International Monetary Fund
Published Date:
January 1998
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    Author(s)
    Paula R. De Masi
    Affiliation
    Paula De Masi is an Economist in the IMF Research Department.

    She thanks Jahangir Aziz, David Coe, Flemming Larsen, and William Lee for many helpful comments and suggestions. An earlier version of this paper was published as “Les Estimations de l'écart de Production du FMI.” in Économie Internationale, No. 69, 1er trimestre 1997, pp. 97–108.

    The concepts of potential output and the output gap are central to the IMF’s analytical work in providing policy recommendations to member governments. This key role has stimulated research at the IMF to develop and refine estimation techniques. This paper summarizes the methodology and results of IMF research on potential output, which has mainly focused on the industrial countries, but more recently has addressed issues related to developing countries and countries in transition. It then discusses the approaches that country desk officers use for operational purposes, and presents estimates of potential output for the major industrial countries. [JEL: E3].

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