Cover; Contents; I. Introduction; II. Estimation Methodologies; A. Univariate Statistical Filtering Methods; B. The Multivariate Approach; C. The Production Function Approach; D. The Structural Vector Autoregression Approach; III. The Data; IV. Estimation Results; A. Univariate Filters; B. Multivariate Filter; C. The Production Function; D. Structural VAR; V. Conclusions and Policy Implications; References
Summary
In this paper we present various techniques to estimate Sri Lanka's potential output and output gap, including statistical and model-based approaches. Compared to conventional statistical filters that rely exclusively on information in a single series, the model-based approaches allow potential output estimates to incorporate information contained in observable data series including inflation, actual output, unemployment and capacity utilization. The estimation results suggest that Sri Lanka's potential output has risen slightly in the last few years
