Estimating sustainable output growth in emerging market economies
Our work is related to the recent literature on the link between business and financial cycles [Alessi, Detken, 2011; Claesens et al., 2011; Schularick, Taylor, 2011]. In our paper we will concentrate on the developments in emerging markets meaning that due to data availability our analysis will be effectively limited to the latest boom/bust episode. That closely links our work with the literature that analyses the main factors explaining output fluctuations during the crisis of 2008 [Frankel, Saravelos, 2010; Lane, Milesi-Ferretti, 2010; Cecchetti et al., 2011; Feldkircher, 2012]. Our main contribution to these strands of research is that we follow [Alberola et al., 2013; Borio et al., 2013; 2014] and employ the empirical model that enables us to decompose output fluctuations into cycle and trend components basing on the empirical relationship with various measures of imbalances. The resulting indicators may have economic interpretation as sustainable (i.e. not associated with buildup of imbalances) output and output gap.