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Author: Luke Van Cleve
Publisher:
ISBN:
Category :
Languages : en
Pages :
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The purpose of this note is to highlight the recent availability of an expanded set of historical data of the staff's estimates of the real-time output gap at the Real-Time Data Research Center of the Federal Reserve Bank of Philadelphia.
Author: Luke Van Cleve
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The purpose of this note is to highlight the recent availability of an expanded set of historical data of the staff's estimates of the real-time output gap at the Real-Time Data Research Center of the Federal Reserve Bank of Philadelphia.
Author: Mr.Alvar Kangur
Publisher: International Monetary Fund
ISBN: 1513512544
Category : Business & Economics
Languages : en
Pages : 42
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Book Description
We study the properties of the IMF-WEO estimates of real-time output gaps for countries in the euro area as well as the determinants of their revisions over 1994-2017. The analysis shows that staff typically saw economies as operating below their potential. In real time, output gaps tend to have large and negative averages that are largely revised away in later vintages. Most of the mis-measurement in real time can be explained by the difficulty in predicting recessions and by overestimation of the economy’s potential capacity. We also find, in line with earlier literature, that real-time output gaps are not useful for predicting inflation. In addition, countries where slack (and potential growth) is overestimated to a larger extent primary fiscal balances tend to be lower and public debt ratios are higher and increase faster than projected. Previous research suggests that national authorities’ real-time output gaps suffer from a similar bias. To the extent these estimates play a role in calibrating fiscal policy, over-optimism about long-term growth could contribute to excessive deficits and debt buildup.
Author: Michael Graff
Publisher:
ISBN:
Category : Banks and banking, Central
Languages : en
Pages : 64
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Author: Athanasios Orphanides
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 56
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Author: Eugen Tereanu
Publisher: International Monetary Fund
ISBN: 1498353401
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
Potential output estimation plays a crucial role in conducting fiscal policy based on structural balances. Difficulties in estimating potential output could lead to an erroneous policy stance with a consequent impact on growth. This paper analyzes historical data on revisions of actual and potential growth in the European Union and the implication of these revisions for the measurement of fiscal effort using the cyclically-adjusted primary balance (CAPB). It finds that revisions in output gap estimates were large, at almost 11⁄2 percent of potential GDP on average. Revisions in potential GDP also contributed significantly to revisions in the estimated CAPB, especially during the crisis years. Given these findings and historical correlations, it proposes an indicative rule of thumb for reducing errors in the measurement of fiscal effort by factoring in that about 30 percent of revisions in actual growth capture changes in potential growth. In other words, the standard advice of “letting automatic stabilizers operate fully” in response to a positive/negative growth shocks likely implies a strengthening/weakening of the structural position.
Author: Francesco Grigoli
Publisher: International Monetary Fund
ISBN: 1498375855
Category : Business & Economics
Languages : en
Pages : 35
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Book Description
Output gap estimates are subject to a wide range of uncertainty owing to data revisions and the difficulty in distinguishing between cycle and trend in real time. This is important given the central role in monetary policy of assessments of economic activity relative to capacity. We show that country desks tend to overestimate economic slack, especially during recessions, and that uncertainty in initial output gap estimates persists several years. Only a small share of output gap revisions is predictable ex ante based on characteristics like output dynamics, data quality, and policy frameworks. We also show that for a group of Latin American inflation targeters the prescriptions from typical monetary policy rules are subject to large changes due to output gap revisions. These revisions explain a sizable proportion of the deviation of inflation from target, suggesting this information is not accounted for in real-time policy decisions.
Author: Onur Ince
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Mr.Jiaqian Chen
Publisher: International Monetary Fund
ISBN: 151352786X
Category : Business & Economics
Languages : en
Pages : 28
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Book Description
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.
Author: Mark William Longbrake
Publisher:
ISBN:
Category : Capital productivity
Languages : en
Pages : 122
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Abstract: This dissertation investigates the usage and estimation of the output gap. The wide use of the output gap as a variable in the monetary policy literature makes learning more about the output gap necessary. The biggest issue with the output gap is that although it is a straightforward theoretical concept it can not be observed directly, meaning it must be estimated. The economics literature currently estimates the output gap by three different methods. The first is direct detrending of the GDP data, the second is indirect estimation, and the third is the production function approach. This dissertation uses both the first and the third methods in order to produce an output gap estimate that is theoretically and econometrically attractive. We begin by investigating the long term trend in US real GDP directly from the GDP data using a new econometric technique, Adaptive Least Squares (ALS). ALS is a special case of the Kalman Filter that allows for a time varying parameter model to be estimated relatively easily. The estimated trend is then used to estimate the output gap. The results of our estimation suggest that GDP does not follow even a time-varying long term trend, so the output 'gap' as specified is illusory. Chapter 3 derives both an unemployment gap and a capacity utilization gap, using Adaptive Least Squares (ALS), and combines them to formulate our Factor Utilization Model. The use of both unemployment and capacity utilization allows us to consider the effects of both labor and capital under or over utilization, thus eliminating a potential substitution bias from the unemployment gap, and avoiding unit root problems from a univariate estimation of the output gap. Additionally the fact that the Factor Utilization Model can be estimated monthly allows for more frequent data availability. Our final chapter compares various estimates of the output gap including all of the estimates developed earlier. We group the output gap estimates into three broad categories, one-sided filters two-sided filters and real-time estimates. Two-sided filters use the entire history of the data in order to arrive at an estimate. This means that they are very useful for looking backwards at the economy to determine how things were, but they are of little use in saying what would, or should have been done in the past. One-sided filters only use the data from periods up to and including the period being estimated. This gives the estimate that would have been generated if the estimation was being done historically. The final group of estimates utilizes real-time data. This is the data as it was initially published before it was subsequently revised. We find that the GDP data and the Congressional Budget Office's estimate of the output gap are subject to large ex post revisions, but that the unemployment and capacity utilization data are not. This lends strength to our Factor Utilization Gap as our output gap proxy of choice.
Author: Anton Cheremukhin
Publisher:
ISBN:
Category : Banks and banking
Languages : en
Pages : 26
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Book Description
I propose a novel method of estimating the potential level of U.S. GDP in real time. The proposed wage-based measure of economic potential remains virtually unchanged when new data are released. The distance between current and potential output--the output gap--satisfies Okun's law and outperforms many other measures of slack in forecasting inflation. Thus, I provide a robust statistical tool useful for understanding current economic conditions and guiding policymaking.
