This paper was prepared for the second annual conference of the National Bank of Ukraine. Gorodnichenko thanks the NSF for financial support. We are grateful to Larry Ball and Olivier Blanchard for helpful comments and Alexander Kopoin (OECD) for sharing OECD data on potential output. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

• July 12, 2017