Estimating output gap in the Czech Republic: DSGE approach

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Authors

HERBER Pavel NĚMEC Daniel

Year of publication 2009
Type Article in Proceedings
Conference Mathematical Methods in Economics 2009
MU Faculty or unit

Faculty of Economics and Administration

Citation
Field Economy
Keywords Output gap; DSGE models; Bayesian estimation
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Description In our contribution, we estimate the output gap that is consistent with a fully specified DSGE model. The output gap is defined in this framework as a deviation of actual output from its flexible-price equilibrium level. The flexible-price equilibrium corresponds to the state of the economy with more efficient allocation. These estimates are thus useful indicators for monetary policy. Our output gap illustrates Czech business cycles which are rather different to other estimates (e.g. HP filter). This result may be typical for economies in transition. Moreover, our results for the Czech economy show that the turning points in the gaps are accompanied by government changes.
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