Evaluation of Potential Output in Russia by Hodrick-Prescott Filter

This paper intends to estimate the potential output in Russia in the period from 1999Q1 to 2018Q4. The output gap which is the difference between the potential output and the actual one is appeared to be the main object of the research. The concepts of the potential output and the output gap are proved to be the signal about the state of the economy and, hence, about the future developments. That is why it is relevant to evaluate the trend and, thus, the business cycles to forecast and predict further inflation rates, values of GDP and prevent recession. The widespread use of the Hodrick-Prescott Filter abroad and rarely on Russian data provokes the choice of this filter for the estimation. The research covers changes in quarterly time series of the real GDP, CPI, and the unemployment rate, which are preliminarily seasonally adjusted. The main aim of the present paper is to evaluate the potential output (trend) over twenty years by the selected method. In order to achieve the goal of the research following tasks are settled: computing the potential output, measuring the output gap, finding out the business cycles and detecting its frequency, checking the results by other filters. The results intend the presence of the repetitive business cycles and even though the output gap and the real GDP fluctuate over the whole period the values of the potential output follow the steady rise. Keywords: GDP, inflation, potential output, output gap, Hodrick-Prescott filter, unemployment.