Skip to main content
Article thumbnail
Location of Repository

Estimating potential output using business survey data in a SVAR framework

By Tatiana Cesaroni


Potential output and the related concept of output gap play a central role in the macroeconomic policy interventions and evaluations. In particular, the output gap, defined as the difference between actual and potential output, conveys useful information on the cyclical position of a given economy. The aim of this paper is to propose estimates of the Italian potential GDP based on structural VAR models. With respect to other techniques, like the univariate filters (i.e. the Hodrick-Prescott filter), the estimates obtained through the SVAR methodology are free from end-of-sample problems, thus resulting particularly useful for short-term analysis. In order to provide information on the economic fluctuations, data coming from business surveys are considered in the model. This kind of data, given their cyclical profile, are particularly useful for detrending purposes, as they allow to include information concerning the business cycle activity. To assess the estimate reliability, an end-of-sample revision evaluation is performed. The ability of the cyclical GDP component to detect business cycle turning points is then performed by comparing the estimated output gaps, extracted with different detrending methods, over the expansion and recession phases of the Italian business cycle chronology.potential output, business survey data, structural VAR models, end-of-sample revisions.

OAI identifier:

Suggested articles


  1. (1981). A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle”
  2. (1993). Discretion versus Policy Rules
  3. (1995). Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research”,
  4. (2003). Estimating potential output for
  5. (2007). Inspecting the cyclical properties of Italian
  6. (1997). Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada”
  7. (1995). Measuring business cycles approximate band-pass filters for economic time series”
  8. (1946). Measuring Business Cycles.
  9. (2001). More international evidence on the historical properties of business cycles”
  10. (1997). Postwar U.S. Business Cycles: An Empirical Investigation”
  11. (1987). The cyclical component of US economic activity”
  12. (1989). The Dynamics Effects of Aggregate Demand and Supply Disturbances”
  13. (1999). The Italian Business Cycle: New Coincident and Leading Indicators and Some Stylized Facts”,
  14. (1999). The Reliability of Output Gap Estimates
  15. (2001). The unreliability of output gap estimates in real time” The review of economics and statistics vol. LXXXIV n°4.
  16. (1985). Trend and Cycles in U.S. macroeconomic time series”
  17. (1995). Why is so hard to measure current output gap” Banque di Canada,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.