Krupkina, Anna Deryugina, Elena B. Ponomarenko, Alexey
Year of Publication:
BOFIT Discussion Papers 11/2014
In the spirit of Borio et al. (2014) we present a model that incorporates information contained in diverse variables when estimating sustainable output growth. For this purpose, we specify a state-space model representing a multivariate HP-filter that links cyclical fluctuation of GDP with several indicators of macroeconomic imbalance. We obtain the parameterization of the model by estimating it over a cross-section of emerging market economies. We show that trend output growth rates estimated using this model are more stable than those obtained with a univariate version of the filter and thus are more consistent with the notion of sustainable output.
output gap financial cycle macroeconomic imbalances emerging markets