Estimate of potential output and output gap in the czech republic

The article describes the estimate of potencial output and output gap in the Czech economy on the macroeconomic level for the period 1991-1999 and forecasted years 2000 and 2001. Two methods are used. The first is the application of Hodrick-Prescott filter to yearly and quarterly data of real GDP. The second one is Cobb-Douglas production function with technological progress, using yearly data about real GDP, stock of capital and labour. In the case of production function three variants of "natural" unemployment rate were used. One of them considers the concept of Non Accelerating Wage Rate of Unemployment (NAWRU). Application of both methods shows relatively low growth rate of the potencial GDP. High positive output gap was estimated in 1996 and negative gap in 1999. After 1999 this negative gap will be gradually closing.