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Comments on “Estimating Potential Output for Argentina” Escude

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Comments on
“Estimating Potential Output
for Argentina”
Escude, Gabrielli, Lanteri and Roulliet
Armando Pinell
Central Bank of Bolivia
September, 2004
General Comments
пЃ¬
Nearly exclusive accounting methodology to calculate
potential output, except for conventional seasonal
adjustment and some implicit filter to “smooth” series
(to be discussed later)
пЃ¬ The main benefit of this approach is transparency
(absence of a “black box”) and simplicity to perform
historical decomposition and forecast
пЃ¬ Nevertheless, an econometric methodology could be
desirable in order to verify that factor shares and factor
elasticities do not differ
пЃ¬ Econometrics also allows us to analyze the convenience
of the functional form chosen (Cobb-Douglas)
A Simple Econometric Exercise
пЃ¬
A simple regression is informative about the first issue
(factor shares vs. elasticities):
GDP
пЂ© пЂЅ 1.58 пЂ« 0.75 п‚ґ log
log пЂЁ Labor
(Std Err)
R
пЃ¬
2
пЂЅ 0.85
пЂЁ
Capital
Labor
пЂ© пЂ« 0.002 п‚ґ Trend
пЂЁ0.75пЂ© пЂЁ0.07 пЂ©
DW пЂЅ 034
пЂѕ 0.56
пЂЁ0.0003пЂ©
Engle пЂ­ Granger Test пЂЅ пЂ­2.93 (31%)
(Capital Share)
This result could be confirmed with more advanced and
usual cointegration analysis a la Johansen (1988) and
Pesaran and Shin (1999)
пЃ¬ Then, the scope of the paper could be extended in this
way to obtain stronger and robust results
Statistical Filters and Smooth Series
пЃ¬
Use of statistical filters (Hodrick and Prescott or Baxter
and King) is avoided in the paper, in order to preclude
some results (like a potential GDP growth fall, as will be
discussed later)
пЃ¬ Then, some issues arise:
– What is the relation between 19 quarters geometric average of
TFP and those others obtained with usual filters?
– NAIRU methodology is not explained explicitly in the paper,
and its relation with monetary policy is crucial
– This methodological question goes beyond TFP and covers the
other two series: Capital and TFP
Comparison with Statistical Filters
пЃ¬
Comparisons with other methodologies raise some
important questions:
– What is the potential GDP growth at “real time” now?
– How was it affected by the deep crisis of 2001?
300000
280000
260000
240000
220000
Baxter and King Filter
Hodrick - Prescott Filter
Escude, Gabrielli, Lanteri and Roullet
200000
180000
80
82 84 86 88 90 92 94 96 98 00 02
Some Extensions
пЃ¬
A prospective analysis could be important, addressing
some of these questions:
– How Argentina could improve its economic policies
(especially monetary and exchange policy) to obtain greater
GDP growth in the near future?
– What investment rate (as % of GDP) is needed to resume
growth and reduce the employment (and social) gap?
– Is Argentina competitive in a context of faster technological
change?
пЃ¬
A future extension with annual series could be the use
of “stochastic frontier analysis” to decompose TFP in
efficiency and productivity, because the methodology
used in the paper assumes the usual efficiency concept
implicit in production functions.
The Main Question
пЃ¬
How would Argentina set a sustainable growth path,
avoiding the fluctuations in the last 30 years of its
economic history?
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