Working Papers present research work by both Danmarks Nationalbank’s employees and our partners. Working Papers are primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.
Output Gap Assessment Through Danmarks Nationalbank’s Production Function Framework
The output gap is often used as quantification of inflationary pressures and thus plays a central role in Danmarks Nationalbank’s assessment of the stance of the Danish economy. This paper refines Danmarks Nationalbank’s existing production function framework, which decomposes total production into labor, capital and a Solow-residual. According to the model estimates, potential output, defined as the level of output the economy would achieve if prices and wages had fully adjusted to current economic conditions, has picked up in recent years.
The Working Papers of Danmarks Nationalbank describe research and development, often still ongoing, as a contribution to the professional debate. The viewpoints and conclusions stated are the responsibility of the individual contributors, and do not necessarily reflect the views of Danmarks Nationalbank.