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2016•Unpublished venueOpen access

CALCULATION OF CAPITAL-TO-OUTPUT RATIO IN A PRODUCTION FUNCTION BY ESTIMATING POTENTIAL OUTPUT AND OUTPUT GAP: THE CASE FOR THE CZECH REPUBLIC AND SLOVAKIA

Dana Kloudová

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Abstract

One of the most used methods of estimation of potential output and output gap, used by many national and international organisations, is a production function.The aim of this paper is to study the impact of method of computation capital-to-output ratio on results of estimation of output gap and potential output, which are very important, but not measurable.We used two methods of computation.The first one was simple: we set it up constant.The second one was calculated according to a sophisticated model.The results of this paper have shown that using variable capital-to-output ratio will bring not very different results from using a constant one.These results were confirmed both for Czech economy and Slovak economy.

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One of the most used methods of estimation of potential output and output gap, used by many national and international organisations, is a production function.The aim of this paper is to study the impact of method of computation capital-to-output ratio on results of estimation of output gap and potential output, which are very important, but not measurable.We used two methods of computation.The first one was simple: we set it up constant.The second one was calculated according to a sophisticated model.The results of this paper have shown that using variable capital-to-output ratio will bring not very different results from using a constant one.These results were confirmed both for Czech economy and Slovak economy.

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Available abstract

One of the most used methods of estimation of potential output and output gap, used by many national and international organisations, is a production function.The aim of this paper is to study the impact of method of computation capital-to-output ratio on results of estimation of output gap and potential output, which are very important, but not measurable.We used two methods of computation.The first one was simple: we set it up constant.The second one was calculated according to a sophisticated model.The results of this paper have shown that using variable capital-to-output ratio will bring not very different results from using a constant one.These results were confirmed both for Czech economy and Slovak economy.

Key concepts: Czech, Output gap, Constant (computer programming), Potential output, Computation, Function (biology), Production (economics), Slovak

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CALCULATION OF CAPITAL-TO-OUTPUT RATIO IN A PRODUCTION FUNCTION BY ESTIMATING POTENTIAL OUTPUT AND OUTPUT GAP: THE CASE FOR THE CZECH REPUBLIC AND SLOVAKIA — Research Paper | ScholarLens