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The author is grateful to Jahangir Aziz, David Coe, Graham Hacche, 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 Economie Internationale, No. 69, 1er trimestre 1997, pp. 97-108.
In Artus (1977) the production function approach was selected over two other techniques: (1) the survey of firms method in which manufacturing firms are regularly asked to indicate their actual operating rate and their preferred operating rate; and (2) the fitting of a linear trend-through peaks method.
For a review of the literature on measuring productivity gains and a comparison of estimates from five studies, see IMF (1997), Box 9, pp. 82-83.
These include Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan Province of China, and Thailand.
See IMF (1996 b), Box 3. The 19 countries are: Argentina, Brazil, Chile, China, Colombia, India, Indonesia, Jordan, Korea, Malaysia, Mexico, Pakistan, Peru, the Philippines, South Africa, Taiwan Province of China, Thailand, Turkey, and Venezuela.
See Gavrilenkov and Koen (1995) for a discussion of difficulties in measuring output during the transition to a market economy.
These estimates are published in IMF (1997 b)
Since capacity utilization and total factor productivity are likely to be simultaneously determined, instrumental variables were used to correct for this bias.
Two other methods for calculating potential output (the Hodrick-Prescott filter, and the production function approach) were also examined in a recent study, and were found to yield quite similar results to the segmented trend approach.
As noted elsewhere, estimates of potential output are subject to a significant margin of uncertainty.