An Alternative Approach to Measuring Output Gap
An Alternative Approach to Measuring Output Gap

Summary/Abstract: This paper tries to identify inflationary pressures in Slovak economy by two methods. The first method uses concept of output gap considered as a main de-terminant of inflation dynamics. The traditional output gap is estimated by struc-tural vector autoregressive (SVAR) technique. An emphasis of the paper is how-ever placed on a new way of looking at inflation dynamics. An explicitly optimiz-ing general equilibrium framework in the presence of nominal rigidities suggests marginal cost as an alternative measure of inflation. The second method, based on this framework, uses real unit labor cost in order to identify inflationary pressures in Slovak economy.

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