Alternative methods of estimating potential output in Albania
Author: Vasilika Kota
Printed on: 26.08.2009
Production date: 26.08.2009
Material category : Not Periodic Publications / Working Papers
The aim of this paper is to estimate potential output and output gap
for Albania, over the period 1996-2006. Potential output is estimated
using the methods of linear regression, Hodrick Prescott filter and the
production function approach. The results of the three methods are
compared using the time domain analyses for measuring economy’s
cycle and their severity. These tests indicate that the production
function approach estimates fewer economic cycles with the lowest
variance. Given that it also provides a supply side of the economy,
this approach appears to be more relevant in estimating potential
output gap in Albania.