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July/August 2009, 
Vol. 91, No. 4
Posted 2009-07-01

Issues on Potential Growth Measurement and Comparison: How Structural Is the Production Function Approach?

by Christophe Cahn and Arthur Saint-Guilhem

This article aims to better understand the factors driving fluctuations in potential output measured by the production function approach (PFA).  The authors integrate a production function definition of potential output into a large-scale dynamic stochastic general equilibrium (DSGE) model in a fully consistent manner and give two estimated versions based on U.S. and euro-area data.