2/2001 (inglise keeles) Marit Rõõm. Potential output estimates for Central and East European countries using production function method

Working Papers of Eesti Pank. No 2, 2001

In the paper potential output of four Central and East European countries is estimated using the Cobb-Douglas production function. Estonian production function uses data of employment, sectoral restructuring, estimated capital stock and foreign direct investments. Capital stock and level of technology are estimated for the Central and East European countries using the same form of production function and parameter estimates of Estonian economy. Potential output is calculated using the long-term unemployment to approximate potential labour input in the production. According to the estimates potential output is higher than actual in all the countries during most of the period, except in the fast economic growth periods (in the Czech Republic in 1995-1996, Estonia in 1997-1998 and Latvia in 1997, respectively).

Author's e-mail address: Marit.Room [at] mail.ee

The views expressed are those of the authors and do not necessarily represent the official view of Eesti Pank.

Table of Contents

Introduction
1. Production function method to estimate potential output
1.1. Theoretical concept
1.2. Empirical research
2. Empirical estimation of potential output for Estonian economy
2.1. The data
2.2. Production function
2.3. Potential output for Estonian economy
3. Empirical estimation of potential output for Central and East European countries
3.1. The data
3.2. Capital stock and technology level
3.3. Potential output for Central and East European countries
Conclusions
References
Appendix 1. Models estimating potential output using the production function method
Appendix 2. List of variables

Potential Output Estimates for Central and East European Countries Using Production Function Method, Working Papers of Eesti Pank No 2, 2001 (PDF*)

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