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Estimating Potential Output Using a Production Function Approach |
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PP: 271-278 |
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doi:10.18576/amis/190204
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Author(s) |
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Khaled Mohammed Al-Sawaie,
Nidal Ali Abbas,
Mohammad AlSmeiran,
Hamza Alrawashdeh,
Asokan Vasudevan,
Hadeel Yaseen,
Suleiman Ibrahim Shelash Mohammad,
Mohammad Faleh Hunitie,
You Li,
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Abstract |
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| The valuable assessment of non-inflationary growth and macroeconomic policy effectiveness hinges upon the elucidation of potential output and output gap dynamics. This study employs the aggregate production function to derive estimations concerning the trajectory of potential output for Jordan throughout the observational span spanning from 1990 to 2019. Analysis of the data reveals a period from 1992 to 1996 characterized by Jordan’s growth surpassing its potential output, contrasting with the subsequent period from 1999 to 2004 where potential output surpassed actual output levels. Such findings serve as indicative evidence of periods within Jordan’s economic landscape marked by excess demand, notably during 1992-1996 and 2006-2011, juxtaposed with periods, including 1999- 2004 and post-2018, where actual output fell short of potential output. Consequently, it is imperative to advocate for the implementation of further labor-intensive production methodologies to mitigate the burgeoning threat of unemployment during phases of labor surplus within the economy.
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