Measuring Output Gap: Is It Worth Your Time?
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Summary:
We apply a range of models to the U.K. data to obtain estimates of the output gap. A structural VAR with an appropriate identification strategy provides improved estimates of output gap with better real time properties and lower sensitivity to temporary shocks than the usual filtering techniques. It also produces smaller out-of-sample forecast errors for inflation. At the same time, however, our results suggest caution in basing policy decisions on output gap estimates.
Series:
Working Paper No. 2020/024
Subject:
Econometric analysis Economic theory Inflation Output gap Potential output Prices Production Structural vector autoregression Supply shocks
English
Publication Date:
February 7, 2020
ISBN/ISSN:
9781513527864/1018-5941
Stock No:
WPIEA2020024
Pages:
28
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