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In other cases, however, hybrid approaches are rather elaborate exercises involving simultaneous estimation of NAIRU with a Phillips curve and trend labour participation, along with some technical function representing production structure. The paper by Lemoine et al. (2008) is a point in case. One criticism of such an approach is that the joint accomplishment of an extended set of tasks may 3 See Beffy et al. 2007. See Cahn and Saint- Guilhem 2007. 5 See Denis et al. 2006. 4 POTENTIAL OUTPUT GROWTH IN GREECE 37 work against conceptual clarity with regards to the specification of technology and technological progress.

At the same time we choose to specify a complete supply model, that is, to include input demand and output price equations along with the production function, so as to base our estimates on a less restrictive framework incorporating market structure features. 1 The Theoretical Production Model Consider an economy that produces one product and let the production technology be defined by equation (1), (1) where Q represents aggregate Value Added, K and L capital and labour input respectively and t stands for time.

Demasi, P. ’ IMF Working Paper No. 177. , K. McMorrow and W. ’ European Commission, Economic Papers No176. Evans, G. and L. ’ Journal of Monetary Economics 33: 233-54. Furceri, D, and A. ’ OECD Economics Department Working Paper No. 699. Gagales, A. ’ In Greece: Selected Issues and Statistical Appendix, IMF Country Report No. 06/5 (Washington: International Monetary Fund) Hodrick, R. and E. ’ Journal of Money, Credit and Banking, 29(1), pp. 1–16. , R. Reis and V. ’ Bank Of England Working Paper No.

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