This study applies the Business Cycle Accounting framework to Thai economy, and proposes a way to estimate potential output from the framework. The process starts from constructing macroeconomics time series data to make them consistent with theoretical concept of the framework, where private consumption yields utility within one period. After that, the newly constructed data are applied to a simple small-open economy model to estimate factors generating business cycles according to the framework. Factors generating business cycles in this framework are in the form of frictions in the economy. This may be the reason why they are usually called twedgesu in the literature. The estimation results show that the most influential wedges, during the period from quarter 1 of 2002 to quarter 3 of 2009, are productivity and labor wedges. Especially, during the small recession in quarter 3 of 2008 to quarter 3 of 2009, productivity wedge explains most of the drop. The application of this framework to estimate potential output for Thailand yields the level of potential output close to a statistical technique commonly used to estimate potential output. However, this current framework provides more flexibility for the adjustment of the estimation to make it suitable with some specific features of each economy. When applying the estimated potential output from this framework with Taylorys (1993) equation, the signs of policy rate responses to inflation rates and output gaps are consistent with Taylorys (1993) rule. However, the magnitude of the responses to inflation rates do not suit well with Taylorys (1993) principles. The authority is still too generous in responses to the inflation rates.