Measuring a Proxy for Iranian Productivity with Kalman Filter

Existence of unit root in logarithm of real GDP can be the sign of that of random walk with drift process for potential output. In this respect, the time growth rate of the potential output can be estimated as a proxy for productivity in state- space form. For this purpose, at first potential output and GDP gap have been simultaneously estimated with Kalman Filter algorithm. In this paper, the results of the potential output and production cycle have been compared with the results of Hodrick- Prescott and Bxter-King approaches. The three methods have confirmed the increase in the economic stability in recent years. With regard to dependence of government income on oil price shocks, the attempt is to incorporate the productivity into the model as a random walk process. This makes it possible to estimate productivity time services during the period from the first quarter of 1367 to the forth quarter of 1384. Findings show that productivity in recent years has enjoyed a slow but positive trend and is somewhat stable. This information could encourage the policy makers to keep the upward trend of it.