A COMPARATIVE STUDY OF TURKEY’S OUTPUT GAPS IN THE RECESSIONS

An effective set of monetary, fiscal, and income policies can only be formulated on the basis of a correct estimation of the position of an economy in a cycle. Output gap estimation provides an important tool for predicting the position of the economy. In this paper, we measure output gap for the Turkish Economy for the period between 2000Q1 and 2013Q4, using production function approach and quarterly data. We utilize two definitions of recession: According to the first definition, we refer a period as recession if output gap as a percent of potential GDP takes negative values for at least two consecutive quarters, while NBER definition refers to a period as recession if we observe at least two consecutive quarters of negative real GDP growth rates. On the basis of first definition we find that the imported crisis lasts shorter but costs more in terms of output gap; while on the basis of NBER definition, the imported crisis lasts longer and costs more in terms of negative real GDP growth.