Estimating output gap for Pakistan economy: Structural and statistical approaches

Adnan Haider, Khan Khan

Research output: Contribution to journalArticleResearchpeer-review

Abstract

The objective of this study is to estimate potential output vis-à-vis output gap for Pakistan's economy. It applies six commonly-used techniques to estimate potential output and from that the output gap. The results suggest that while these estimates are not the same they nonetheless do show some degree of association among each other. Therefore, a composite output gap is calculated for 1950 to 2007 that depicts that Pakistan economy has been observing a cyclical episode of excess supply followed by excess demand. Evidence further suggests that Pakistan is currently experiencing rising demand pressures since Fiscal Year 2005 and these pressures show a high degree of correlation with inflation.
Original languageEnglish
Article number1994-201X
Pages (from-to)31-60
Number of pages30
JournalState Bank of Pakistan Research Bulletin
Volume4
Issue number1
Publication statusPublished - 2008
Externally publishedYes

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Output gap
Pakistan
Potential output
Excess demand
Fiscal
Inflation

Cite this

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Estimating output gap for Pakistan economy : Structural and statistical approaches. / Haider, Adnan; Khan, Khan.

In: State Bank of Pakistan Research Bulletin, Vol. 4, No. 1, 1994-201X, 2008, p. 31-60.

Research output: Contribution to journalArticleResearchpeer-review

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AB - The objective of this study is to estimate potential output vis-à-vis output gap for Pakistan's economy. It applies six commonly-used techniques to estimate potential output and from that the output gap. The results suggest that while these estimates are not the same they nonetheless do show some degree of association among each other. Therefore, a composite output gap is calculated for 1950 to 2007 that depicts that Pakistan economy has been observing a cyclical episode of excess supply followed by excess demand. Evidence further suggests that Pakistan is currently experiencing rising demand pressures since Fiscal Year 2005 and these pressures show a high degree of correlation with inflation.

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