Traditional and New Keynesian Dynamic Models for Potential Output and Inflation Rate

This paper uses the Kalman filter to estimate potential output as a latent process. We estimate two Dynamic Linear Models, comparing the results obtained through a traditional and a New Keynesian model. We verify that the traditional measures of output gap, even if usually applied in the estimation of the New Keynesian Phillips curve, are not consistent with the theory. We propose a New Keynesian measure that overcomes this limit. We suggest it as an alternative to the use of marginal costs.