Optimisation of the Implementation of the European Commission Method for the Estimation of the Production Potential in Switzerland

Potential output is an economic concept that underlies sustainable economic policy making and decision making in a forward-looking environment. Although potential output (PO) is an important economic concept, it is not observable. It must therefore be estimated. As with any application of statistical methods, estimation is characterised by two sources of uncertainty: parameter uncertainty and model uncertainty. This study focuses on the role of model uncertainty in the course of estimating potential output for the Swiss economy.