MEASURING THE POTENTIAL LEVEL AND SHORT-TERM GAPS IN RUSSIAN GDP

Abstract

To analyze the economic growth, the ratio of aggregate supply and demand, expansions and contractions in economic activity, there is a need for information on how much the current total output differs from its potential level. The appropriate measures of monetary policies, namely: consolidation or stimulation to smooth out the fluctuations of macroeconomic development, depend on whether the economic aggregate is growing above or below its potential level. Under the neo-Keynesian economic theory, it is assumed that such an unobserved component in the dynamics of the gross domestic product as a long-term potential level corresponds to an equilibrium of the price level while its short-term gaps with real dynamics reflect the processes of price and income adaptation to shocks. The article explores the concept of potential level and short-term gaps in economic growth as well as an algorithm to calculate them using the production function (the Cobb-Douglas specification). The results of an empirical assessment of the potential level and shortterm gaps in the dynamics of Russian gross domestic product for 2006-2016 are presented. Based on the results obtained, the authors determined the amplitude and vector of the actual aggregate output deviations from the potential capabilities of the economy, formulated the factors that contributed to reducing the output potential level and measures that can strengthen the national economic growth. Since mid-2014, the negative output gap corresponded to crisis phenomena when labour and capital were not fully used. The negative nature of the speed regime of the Russian economy can be changed only through those structural reforms that will be conducted thoughtfully, consistently and in accordance with additional support the development of new knowledge, products and technologies.