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.
|Number of pages||30|
|Journal||State Bank of Pakistan Research Bulletin|
|Publication status||Published - 2008|