Comments onComments on “Estimating Potential Output “Estimating Potential Output

for Argentina”for Argentina”Escude, Gabrielli, Lanteri and RoullietEscude, Gabrielli, Lanteri and Roulliet

Armando Pinell

Central Bank of Bolivia

September, 2004September, 2004

General CommentsGeneral Comments Nearly exclusive accounting methodology to calculate

potential output, except for conventional seasonal adjustment and some implicit filter to “smooth” series (to be discussed later)

The main benefit of this approach is transparency (absence of a “black box”) and simplicity to perform historical decomposition and forecast

Nevertheless, an econometric methodology could be desirable in order to verify that factor shares and factor elasticities do not differ

Econometrics also allows us to analyze the convenience of the functional form chosen (Cobb-Douglas)

A Simple Econometric ExerciseA Simple Econometric Exercise A simple regression is informative about the first issue

(factor shares vs. elasticities):

(31%) 93.2TestGranger Engle034DW85.02

0003.007.075.0Err) (Std

LaborCapital

LaborGDP Trend002.0log75.058.1log

R

This result could be confirmed with more advanced and usual cointegration analysis a la Johansen (1988) and Pesaran and Shin (1999)

Then, the scope of the paper could be extended in this way to obtain stronger and robust results

Share) (Capital56.0

Statistical Filters and Smooth SeriesStatistical Filters and Smooth Series

Use of statistical filters (Hodrick and Prescott or Baxter and King) is avoided in the paper, in order to preclude some results (like a potential GDP growth fall, as will be discussed later)

Then, some issues arise:– What is the relation between 19 quarters geometric average of

TFP and those others obtained with usual filters?– NAIRU methodology is not explained explicitly in the paper,

and its relation with monetary policy is crucial– This methodological question goes beyond TFP and covers the

other two series: Capital and TFP

Comparison with Statistical FiltersComparison with Statistical Filters Comparisons with other methodologies raise some

important questions:– What is the potential GDP growth at “real time” now?– How was it affected by the deep crisis of 2001?

180000

200000

220000

240000

260000

280000

300000

80 82 84 86 88 90 92 94 96 98 00 02

Baxter and King FilterHodrick - Prescott FilterEscude, Gabrielli, Lanteri and Roullet

Some ExtensionsSome Extensions A prospective analysis could be important, addressing

some of these questions:– How Argentina could improve its economic policies

(especially monetary and exchange policy) to obtain greater GDP growth in the near future?

– What investment rate (as % of GDP) is needed to resume growth and reduce the employment (and social) gap?

– Is Argentina competitive in a context of faster technological change?

A future extension with annual series could be the use of “stochastic frontier analysis” to decompose TFP in efficiency and productivity, because the methodology used in the paper assumes the usual efficiency concept implicit in production functions.

The Main QuestionThe Main Question How would Argentina set a sustainable growth path, avoiding

the fluctuations in the last 30 years of its economic history?