A Robust Assessment of the Romanian Business Cycle

The paper provides potential output and output gap estimates for the Romanian economy in the period 1998 –2008. Our approach consists in combining the structural method of the production function with several non-structural statistical detrending methods: HodrickPrescott, Kalman, band-pass, and wavelet transform …lters. In this way, the obtained results bene…t both from the economic foundations the production function method is relying on, as well as from the ‡exibility of the detrending techniques. The contribution of our analysis to the scarce literature dealing with the estimation of the cyclical position of the Romanian economy is twofold. First, we identify the contribution of the production factors to the potential output growth. Second, we aggregate the results obtained through …ltering techniques in a consensus estimate ascribing to each method a weight inversely related to its revision stability. Our results suggest for the period 2000-2008 an average annual growth rate of the potential output equal to 5.8%, but on a descendant slope at the end of the analyzed period, due to the adverse developments in the macroeconomic context. Keywords: potential GDP, output gap, NAIRU, business cycle. JEL Classi…cations: C32, E24, E32. Email: maltar@ase.ro yEmail: ciprian.necula@fin.ase.ro zEmail: gabriel.bobeica@fin.ase.ro