ESTIMATION OF OUTPUT GAP IN POLISH ECONOMY USING STRUCTURAL VAR MODELS

Abstract

The paper presents a method of estimating the output gap for Poland, advised by Blanchard and Quah [1989]. This method stems from the traditional Keynesian and neoclassical synthesis, with identifies potential output with the aggregate supply capacity of the economy and cyclical fluctuations with changes in aggregate demand. There were made an estimation and verification of vector autoregression model VAR(2) for the growth rate of Gross Domestic Product (GDP) and unemployment rate, than of its structuring. Determination of the reaction function of demand and supply, in particular the reaction function of GDP growth on the demand-side disorder, allowed the estimation of the size of output gap. Potential output can be described as following a random walk if production impulse evolve as a stochastic trend, for example, if productivity growth depends on the stochastic arrival of new technologies.