Potential Gross Domestic Product (GDP)

Definition

'"How much output can the economy produce under conditions of full employment?" The concept and measurement of potential GNP are addressed to this question.'Arthur M. Okun 1962

"Potential gross domestic product (GDP) is defined in the OECD’s Economic Outlook publication as the level of output that an economy can produce at a constant inflation rate. Although an economy can temporarily produce more than its potential level of output, that comes at the cost of rising inflation. Potential output depends on the capital stock, the potential labour force (which depends on demographic factors and on participation rates), the non-accelerating inflation rate of unemployment (NAIRU), and the level of labour efficiency." OECD, Paris

Recommended sources

DSI's Global Economic Statistics, provide output gap and potential GDP calculated by DSI (basing on IMF and OECD series)

Related ATS topics

Output Gap

References

Potential GNP: Its measurement and significance, Arthur M. Okun, Cowles Foundation Paper 190 (reprinted from the 1962 Proceedings of the Business and Economic Statistics Section)

A Simple Multivariate Filter for Estimating Potential Output, Patrick Blagrave, Roberto Garcia-Saltos, Douglas Laxton, and Fan Zhang1, IMF Working Paper April 2015

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