Output gap estimatıon for the case of Turkey

Abstract

This study investigates the output gap estimation using dynamic, stochastic, and general equilibrium models. In macroeconomics, output gap is defined as the difference between the actual output and the potential output. Actual output refers to the GDP, which measures the monetary value of the total production in the domestic economy in a certain time period. Potential output is the maximum amount of production that can be reached with the available resources and technology. Potential output is measured by HP-Filtering and DSGE methods. In this thesis, these methods are used to estimate the maximum output gap for the Turkish Economy. It is shown that both these methods predict the maximum output gap accurately. In particular, Csminwel and Monte-Carlo simulation methods are used to obtain the maximum output gap between the first quarter of 2005 and the second quarter of 2014.