Estimation And Evaluation Of Anhui’s Potential Output

Since the global financial crisis in 2008,China’s economic growth is declining, growth miracle gradually disappear,the economy is facing downward pressure. Where is the future of our economy?What kind of development will our economy be is one of the focus of our discussion.Since the national economic development has entered a new normal situation,Anhui Province economic development trend is also worthy of studying.Potential output means "the maximum possible output when the economy of all resources be fully utilized". By measuring the potential growth rate of potential output can help us analyse the current health of the economy, predict future economic trends, it is an important tool for macroeconomic analysis, can help to develop long-term regional economic policy and curb short-term fluctuations in the economy. Another important concept corresponding to potential output is output gap, which is the difference between actual and potential output between. If the output gap is negative, that is, the actual output level is below potential output level, the real economy is running below the potential level.It indicates that there may be a low economic efficiency or elements idle situation in the development process. Transfer to the labor market, there will be involuntary unemployment, the real unemployment rate is higher than the natural rate of unemployment phenomenon, when the unemployment rate reaches a certain level, it is easy to trigger a series of social problems. High unemployment is economic development can not be tolerated. When the output gap is positive, that is, the actual output is above potential output, the real economy on potential level. That means the resource may be overuesd during the development of the economy, which can affect the price of other factors and then transmitted to other products, the impact of short-term needs cannot increase long-term real output, but ultimately lead to inflationary and other consequences. Therefore, estimates and analysis of potential output and output gap is an important reference value for government formulate economic development policies.This paper first reviews the various definition of the concept of potential output, integrated summarized the research status on potential output and potential economic growth rate, and then compared the advantages and disadvantages of the three methods that used to estimated potential output, and according to the comparison,this paper finally choose the HP filter method to estimate the potential output and the output gap of Anhui Province. In order to precisely analyze Anhui economic development,this article selected pluralistic indicators to measure the level of economic development over the past decade, not only the economic potential and potential output growth rate was calculated, but also specifically estimates the level of potential output and potential growth of each industry. Calculation results show that: since Chinese economic reform, the potential growth rate of Anhui increased steadily, but since 2008, the potential growth rate in slow decline, then the followed part of this paper analyzed the reasons of this decline; potential growth rate of primary industry has been maintained at a relatively stable level, and the low level of real growth rate deviates from the potential growth rate; the change of the second industry’s potential growth rate is more obvious, especially in recent years, the actual growth rate is lower than the potential growth rate, and there is a widening output gap. Potential growth rate of the tertiary industry went through firstly but then decreased, finally stable at the level of 10%. HP estimates based on the results of this paper to predict the potential growth rate in recent years, Anhui economy should be around 10%, but the actual rate of economic growth in recent years did not reach the level of potential output. In the end of this paper, according to the findings, in order to promote economic development to reach up to the potential level,we put forward some policy recommendations,.