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

  • 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
Keywords: HP Filter, PT decomposition, heuristic methods, Dynamic Factor Models, potential GDP
JEL Classification: C38, C52, E32

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
13-07-2022
How to Cite
CoronaF., OrracaP., & López-PérezJ. (2022). Evaluating different methods of potential GDP estimates: The case of Mexico. Estudios Económicos, 37(2). https://doi.org/10.24201/ee.v37i2.432
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