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Sustainability 2015, 7(3), 3338-3358; doi:10.3390/su7033338

Estimating Potential GDP for the Romanian Economy and Assessing the Sustainability of Economic Growth: A Multivariate Filter Approach

Department of Finance, Faculty of Finance, Insurance, Banking and Stock Exchange, Academy of Economic Studies, 5-7 Mihail Moxa, Bucharest 010961, Romania
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Academic Editors: Marc A. Rosen and Popescu Gheorghe
Received: 28 November 2014 / Revised: 11 March 2015 / Accepted: 12 March 2015 / Published: 19 March 2015
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Abstract

In the current context of economic recovery and rebalancing, the necessity of modelling and estimating the potential output and output gap emerges in order to assess the quality and sustainability of economic growth, the monetary and fiscal policies, as well as the impact of business cycles. Despite the importance of potential GDP and the output gap, there are difficulties in reliably estimating them, as many of the models proposed in the economic literature are calibrated for developed economies and are based on complex macroeconomic relationships and a long history of robust data, while emerging economies exhibit high volatility. The object of this study is to develop a model in order to estimate the potential GDP and output gap and to assess the sustainability of projected growth using a multivariate filter approach. This trend estimation technique is the newest approach proposed by the economic literature and has gained wide acceptance with researchers and practitioners alike, while also being used by the IMF for Romania. The paper will be structured as follows. We first discuss the theoretical background of the model. The second section focuses on an analysis of the Romanian economy for the 1995–2013 time frame, while also providing a forecast for 2014–2017 and an assessment of the sustainability of Romania’s economic growth. The third section sums up the results and concludes. View Full-Text
Keywords: potential GDP; output gap; inflation; unemployment; NAIRU; manufacturing capacity utilization potential GDP; output gap; inflation; unemployment; NAIRU; manufacturing capacity utilization
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Armeanu, D.; Crețan, G.C.; Lache, L.; Mitroi, M. Estimating Potential GDP for the Romanian Economy and Assessing the Sustainability of Economic Growth: A Multivariate Filter Approach. Sustainability 2015, 7, 3338-3358.

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