The Utilization-Adjusted Output Gap: Is the Russian Economy Overheating?

Author/Editor:

Nienke Oomes ; Oksana Dynnikova

Publication Date:

March 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper estimates the output gap in Russia using a utilization-adjusted production function approach, which we argue is preferable to traditional output gap methods. The approach amounts to (1) using available surveys to estimate the "natural rates" of capacity and labor utilization above which inflation begins to accelerate; (2) estimating a production function with utilization-adjusted capital and labor inputs; and (3) defining potential output as the level of output obtained when both capital and labor are at their estimated natural rates. The results suggest that the output gap in Russia was negative between 1999 and 2003, but may have recently become positive, thus contributing to inflationary pressures.

Series:

Working Paper No. 2006/068

Subject:

Capacity utilization Inflation Labor Labor policy Output gap

English

Publication Date:

March 1, 2006

ISBN/ISSN:

9781451863284/1018-5941

Stock No:

WPIEA2006068

Pages:

46

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