Evaluating different methods of potential GDP estimates: The case of Mexico

Authors

  • Francisco Corona Instituto Nacional de Estadística y Geografía
  • Pedro Orraca El Colegio de la Frontera Norte
  • Jesús López-Pérez Instituto Nacional de Estadística y Geografía

DOI:

https://doi.org/10.24201/ee.v37i2.432

Keywords:

HP Filter, PT decomposition, heuristic methods, Dynamic Factor Models, potential GDP

Abstract

With the purpose of contributing to the literature that focuses on the estimation of Potential Gross Domestic Product (GDP), this study evaluates four different estimation methods of Potential GDP using quarterly data from Mexico for the period 1998:Q1-2020:Q2. The procedures used for its estimation are: 1) Heuristic methods, 2) The Hodrick Prescott filter, 3) Non-Stationary Dynamic Factor Model, and 4) The Permanent-Transient (PT) decomposition of Gonzalo and Granger (1995). We conclude that, econometrically, the best results are obtained when using the PT decomposition.

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Published

2022-07-13

How to Cite

Corona, F., Orraca, P., & López-Pérez, J. (2022). Evaluating different methods of potential GDP estimates: The case of Mexico. Estudios Económicos De El Colegio De México, 37(2), 285–313. https://doi.org/10.24201/ee.v37i2.432