Prague Economic Papers 2005, 14(3):253-266 | DOI: 10.18267/j.pep.265

Potential Output in the Czech Republic: A Production Function Approach

Jaromír Hurník1, David Navrátil2
1 Czech National Bank, Na Příkopě 28, CZ - 115 03 Prague 1 (e-mail: jaromir.hurnik@cnb.cz).
2 Česká spořitelna, a.s., Olbrachtova 1929/62, CZ - 140 00 Prague 4 (e-mail: dnavratil@csas.cz).

This paper deals with the Czech economy supply side performance from the macroeconomic point of view. In order to evaluate the supply side behaviour we calculate the potential output dynamic path and contribution of its particular determinants using the production function method. The results show that the potential output growth was rather slow around 2 per cent. This implies that e. g. even 3 per cent growth can cause macroeconomic imbalances. Increase of the non-accelerating-inflation-rate of unemployment (NAIRU), weak growth of the capital stock and weak growth of total factor productivity appear to be the reasons for the constrained ability of the Czech economy to grow steadily and converge to EU level.

Keywords: capital stock, potential output, production function, NAIRU, total factor productivity
JEL classification: E23, O47

Published: January 1, 2005  Show citation

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Hurník, J., & Navrátil, D. (2005). Potential Output in the Czech Republic: A Production Function Approach. Prague Economic Papers, 14(3), 253-266. doi: 10.18267/j.pep.265
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