Sectoral Output Gaps – Estimates for Bulgaria

Abstract

The paper reveals the impact of the output gap of the various sectors on the total output gap in the Bulgarian economy. The HP filter procedure has been applied in order to evaluate the potential output of each sector. The results show different cyclical dynamics between sectors which assumes that the structural change of production is driven not only by cyclical factors but rather by fundamental. As some of the sectoral output gaps appear to be much more volatile than others a shock in one sector can have an impact on the rest of the economy through the cross-sectoral dependencies. The last part of the paper reveals the contribution of the individual sector output gap to the overall economy output gap. Based on that, the sectors determining the cyclical state of the economy over the period 2000-2019 have been identified.