Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/179268
Authors: 
Dovern, Jonas
Zuber, Christopher
Year of Publication: 
2017
Series/Report no.: 
Discussion Paper Series 639
Abstract: 
This paper analyzes how the OECD revises potential output (PO) estimates after recessions. We show that downward revisions are substantial and mostly driven by supply shocks while PO estimates do not significantly react to demand shocks. In addition, revisions are partly caused by avoidable mismeasurement of PO before recessions. In particular, we show that the length of the preceding boom and pre-recession values of the current account balance and credit volumes are predictors of post-recession PO revisions. Our results call for improved methods for estimating PO and provide evidence against the existence of substantial hysteresis effects of demand shocks.
Subjects: 
potential output
trend
output gap
hysteresis
OECD
JEL: 
E32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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