What Is in Your Output Gap? Unified Framework & Decomposition into Observables

May 10, 2013

Preview Citation

Format: Chicago

Michal Andrle. What Is in Your Output Gap? Unified Framework & Decomposition into Observables, (USA: International Monetary Fund, 2013) accessed December 25, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper discusses several popular methods to estimate the ‘output gap’. It provides a unified, natural concept for the analysis, and demonstrates how to decompose the output gap into contributions of observed data on output, inflation, unemployment, and other variables. A simple bar-chart of contributing factors, in the case of multi-variable methods, sharpens the intuition behind the estimates and ultimately shows ‘what is in your output gap.’ The paper demonstrates how to interpret effects of data revisions and new data releases for output gap estimates (news effects) and how to obtain more insight into real-time properties of estimators.

Subject: Capacity utilization, Econometric analysis, Estimation techniques, Inflation, Output gap, Potential output, Prices, Production, Production growth

Keywords: B. output gap estimation, Backward-looking output gap equation, Capacity utilization, DSGE, Estimation techniques, Inflation, Inflation expectation, Least squares, Linear filters, Observable decomposition, Output gap, Output gap estimate, Output gap estimation approach, Output gap estimation method, Output gap estimator, Potential output, WP

Publication Details

Pages:

45
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/105
Stock No:

WPIEA2013105
ISBN:

9781484399552
ISSN:

1018-5941

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