Potential GDP Estimation and Output Gaps in Emerging Economies: A Comparative Review
DOI:
https://doi.org/10.5281/zenodo.17107800Keywords:
Potential GDP, Output gap, Emerging economies, Statistical filters, Production function, Multivariate and hybrid models, Economic crises, Structural reforms, Data limitations, Fiscal and monetary policy in developing countriesAbstract
Estimating potential GDP and output gaps in emerging economies is particularly difficult due to limited data, structural
issues, and external shocks that hinder accurate measurement. This paper combines evidence from Romania, Ethiopia,
Moldova, and Saudi Arabia's non-oil sector to assess the effectiveness of statistical filters, production functions, and various
multivariate or hybrid methods. Research shows that crises have a more profound and lasting impact on potential output in
developing countries. Structural issues like labor migration, weak institutions, and reliance on commodities increase these
vulnerabilities. Romania’s multivariate models, Ethiopia’s ARDL framework, and Moldova’s diverse methods showcase
both creativity and challenges in estimating emerging economies. Saudi Arabia's non-oil growth shows strong resilience
amid its diversification efforts. The review finds that although simple methods offer useful benchmarks, multivariate and
hybrid approaches yield more dependable policy signals. Enhancing data systems, promoting transparency, and tailoring
approaches to fit institutional contexts are vital for credible and sustainable growth in emerging economies
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