The Utilization-Adjusted Output Gap: Is the Russian Economy Overheating?

March 1, 2006

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Format: Chicago

Nienke Oomes, and Oksana Dynnikova. The Utilization-Adjusted Output Gap: Is the Russian Economy Overheating?, (USA: International Monetary Fund, 2006) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper estimates the output gap in Russia using a utilization-adjusted production function approach, which we argue is preferable to traditional output gap methods. The approach amounts to (1) using available surveys to estimate the "natural rates" of capacity and labor utilization above which inflation begins to accelerate; (2) estimating a production function with utilization-adjusted capital and labor inputs; and (3) defining potential output as the level of output obtained when both capital and labor are at their estimated natural rates. The results suggest that the output gap in Russia was negative between 1999 and 2003, but may have recently become positive, thus contributing to inflationary pressures.

Subject: Capacity utilization, Inflation, Labor, Labor policy, Output gap

Keywords: Inflation rate, Phillips curve, Utilization rate, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/068
Stock No:

WPIEA2006068
ISBN:

9781451863284
ISSN:

1018-5941

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