Estimating Romania’s potential GDP: a production function and multivariate approach
This research assesses Romania’s potential GDP and its variances employing the production function methodology and a multivariate approach. The Cobb-Douglas function measures potential production by integrating labor, capital, and total factor productivity (TFP), utilizing Kalman filtering for labor...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2025-03-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/1826.pdf
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| Summary: | This research assesses Romania’s potential GDP and its variances employing the
production function methodology and a multivariate approach. The Cobb-Douglas function
measures potential production by integrating labor, capital, and total factor productivity (TFP),
utilizing Kalman filtering for labor and the perpetual inventory approach for capital. TFP trends
are derived using the Hodrick-Prescott filter. A multivariate filter enhances potential GDP estimates
by correlating output gaps with inflation, unemployment, and capacity utilization. Bayesian
methodologies guarantee reliable parameter estimate. The results indicate cyclical variations, with
recessions and crises exerting enduring impacts on potential output. Structural changes and EU
entry foster long-term resilience, although inflation and labor dynamics are crucial factors. This
work enhances the precision of potential GDP calculation in a growing economy by integrating
various estimation methodologies. It presents empirical information regarding the enduring impacts
of economic shocks and furnishes insights for policymakers in formulating efficient fiscal and
monetary responses to macroeconomic volatility. |
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| ISSN: | 1841-8678 1844-0029 |