1
Ph.D. Student, Economic Department, Shiraz University
2
Associate Professor of Economics, Shiraz University
Abstract
Output gap is an important economic variable. This is widely used in economic literature on monetary policy and business cycle. This variable is not observable, hence it has to be estimated. Different methods such as Hodrick-Prescott filter and CBO are used to estimate this important index. It is noted that, the role of human capital is neglected in estimating the output gap. In the present paper, we introduce human capital into production function and use different methods to estimate output gap for Iran over the period 1967-2007. Non-nested tests and root mean square error (RMSE) are used to compare the forecasting power of each index. Our results show that our proposed method performs better and has higher forecasting power than Hodrick-Prescott filter and CBO methods in estimating output gap. This result might have important policy implications for economic policymakers and researchers in Iran.
Khorsandi, M., Eslamloueyan, K., & Zonnoor, H. (2013). Estimating the Output Gap with Emphasis on Human Capital in Iran. The Journal of Economic Policy, 1(2), 59-98.
MLA
Morteza Khorsandi; Karim Eslamloueyan; Hossein Zonnoor. "Estimating the Output Gap with Emphasis on Human Capital in Iran". The Journal of Economic Policy, 1, 2, 2013, 59-98.
HARVARD
Khorsandi, M., Eslamloueyan, K., Zonnoor, H. (2013). 'Estimating the Output Gap with Emphasis on Human Capital in Iran', The Journal of Economic Policy, 1(2), pp. 59-98.
VANCOUVER
Khorsandi, M., Eslamloueyan, K., Zonnoor, H. Estimating the Output Gap with Emphasis on Human Capital in Iran. The Journal of Economic Policy, 2013; 1(2): 59-98.
)
