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http://dx.doi.org/10.5351/KJAS.2014.27.3.387

An Analysis of Factors Affecting the Variation of GDP Gap by a Decomposition Method  

Chang, Youngjae (Department of Information Statistics, Korea National Open University)
Publication Information
The Korean Journal of Applied Statistics / v.27, no.3, 2014 , pp. 387-396 More about this Journal
Abstract
The GDP gap (also called the output gap) is the difference between potential GDP and actual GDP. Potential GDP is the maximum sustainable output that is achieved when the resources (labor and capital) are used to capacity. Central banks pursuing price and employment stability consider the output gap as an informative variable for monetary policy since the output gap could be regarded as a proxy of demand-supply imbalances. In this paper, the GDP gap of Korea is decomposed following the filtering method in the previous research, and major factors that affect the variation of GDP gap are investigated based on the decomposed series. The analysis results by the Super Smoother algorithm used in Fox et al. (2003)and Fox and Zurlinden (2006) are found consistent with theory. Much of the variation of nominal GDP gap is explained by Total Factor Productivity(TFP) gap, which is the change of productivity due to recent technological innovation and environmental change. It is also found that variation of terms of trade significantly affects the GDP gap of Korea due to its high dependency on international trade; however, the effect of the domestic price is not negligible like other countries.
Keywords
GDP gap; GDP growth; Super Smoother;
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Times Cited By KSCI : 1  (Citation Analysis)
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