Potential output in Iran: A comparison of alternative methods,1978-2008

چکیده

This paper examines potential output with alternative methods for the period 1978-2008 using annual data of the Iranian economy. We applied Hodrick - Prescott Filter, Production Function and SVAR methods for estimation of annually potential output. The results show that the turning points for these methods look similar and almost produce similar results for output gap. Also the estimated potential output and output gap are conformed to economic and political events as output gap has decreased in war period (1980-1989) because of war expenditures, reducing production and therefore decreasing GDP. Also Iranian economy has been faced with negative output gap and therefore a severe recession because of the crisis in South East Asia in late 1990s. Gap trend is uprising after 2005 for the reason that happening oil shock and economic advancement for increasing oil income.

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