This article surveys several recent techniques proposed to measure potential output and the NAIRU(Non-accelerating Inflation Rate of Unemployment) in which potential GDP and NAIRU are modeled as an unobserved stochastic trend. Given the shortcomings of univariate approaches to estimate the potential GDP and NAIRU, the output and unemployment rate are combined with inflation equations to form a bivariate unobserved component model of Kuttner(1994) which is estimated via MLE through the use of the Kalman-filter algorithm.

The bivariate model, however, estimates potential output and the NAIRU separately. More structural approach is attained by using Okun's Law, which is an empirical relationship between the GDP gap and the unemployment gap. In trivariate model, the potential GDP is estimated simultaneously with the NAIRU. It is found that estimated potential GDP and the natural rate of unemployment in Korea show some structural changes after the currency crisis in 1997, regardless of model specification.