02072cas a2200277 a 4500 AALejournalIMF019066 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484398067 1018-5941 BD-DhAAL BD-DhAAL Alichi, Ali. Multivariate Filter Estimation of Potential Output for the United States : An Extension with Labor Market Hysteresis / Ali Alichi, Hayk Avetisyan, Douglas Laxton, Shalva Mkhatrishvili. Washington, D.C. : International Monetary Fund, 2019. 1 online resource (35 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper extends the multivariate filter approach of estimating potential output developed by Alichi and others (2018) to incorporate labor market hysteresis. This extension captures the idea that long and deep recessions (expansions) cause persistent damage (improvement) to the labor market, thereby reducing (increasing) potential output. Applying the model to U.S. data results in significantly smaller estimates of output gaps, and higher estimates of the NAIRU, after the global financial crisis, compared to estimates without hysteresis. The smaller output gaps partly explain the absence of persistent deflation despite the slow recovery during 2010-2017. Going forward, if strong growth performance continues well beyond 2018, hysteresis is expected to result in a structural improvement in growth and employment. Mode of access: Internet Avetisyan, Hayk. Laxton, Douglas. Mkhatrishvili, Shalva. IMF Working Papers; Working Paper ; No. 2019/035 Full text available on IMF http://elibrary.imf.org/view/journals/001/2019/035/001.2019.issue-035-en.xml IMF e-Library