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Does the Gap Model Work in Asia?
Author:
Mr. C. John McDermottnull

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Mr. David T. Coe
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Series:
IMF Working Papers
Volume/Issue:
Volume 1996: Issue 069
Language:
English
Publication Date:
01 Jul 1996
DOI:
https://doi.org/10.5089/9781451960747.001
ISBN:
9781451960747
ISSN:
1018-5941
Pages:
26
Keywords:
WP; gap model; inflation expectation; gap variable; inflation development; calculated output gaps; change in inflation; Output gap; Inflation; Potential output; Monetary base; National income; Asia and Pacific; research strategy; trend output; broad money money supply; estimated output gap
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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There is considerable evidence from industrial countries that the output gap is an important determinant of inflation. We examine whether the gap model also works in developing, newly industrializing, and industrial Asian economies. Our output gaps are based on a new nonparametric estimation procedure for trend output that does not require an arbitrary specification of the degree to which the data are smoothed. We test simple versions of the gap model in which the change in inflation is related to the output gap, as well as to the money supply and the terms of trade. We conclude that the gap model works very well in almost all of the Asian economies we study.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 1996: Issue 069