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Real time representation of the UK output gap in the presence of model uncertainty

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  • Garratt, Anthony
  • Lee, Kevin
  • Mise, Emi
  • Shields, Kalvinder

Abstract

We undertake an empirical analysis of the UK output gap using real-time data and an approach that accommodates, in a coherent way, three types of uncertainty when measuring the gap. These are model uncertainty (associated with the choice of model and de-trending technique), estimation uncertainty (with a given model) and measurement uncertainty (associated with the reliability of the data). The approach employs VAR models, along with Bayesian-style 'model averaging' procedures, to jointly explain and forecast real-time measures and realisations of output series. A comprehensive representation of the UK output gap and the associated uncertainties are provided in real time by probability forecasts over 1961q2-2005q4.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Forecasting.

Volume (Year): 25 (2009)
Issue (Month): 1 ()
Pages: 81-102

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Handle: RePEc:eee:intfor:v:25:y:2009:i:1:p:81-102

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Web page: http://www.elsevier.com/locate/ijforecast

Related research

Keywords: Output gap Real time data Revisions Output trends Model uncertainty Probability forecasts;

References

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Citations

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Cited by:
  1. Bell, William Paul, 2009. "Adaptive interactive expectations: dynamically modelling profit expectations," MPRA Paper 38260, University Library of Munich, Germany, revised 09 Feb 2010.
  2. Anthony Garratt & James Mitchell & Shaun P. Vahey, 2011. "Measuring Output Gap Nowcast Uncertainty," CAMA Working Papers 2011-16, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Kevin Lee & Nilss Olekalns & Kalvinder Shields, 2012. "Meta Taylor Rules for the UK and Australia; Accommodating Regime Uncertainty in Monetary Policy Analysis using Model Averaging Methods," Department of Economics - Working Papers Series 1138, The University of Melbourne.
  4. Kevin Lee, James Morley and Kalvinder Sheields, 2011. "The Meta Taylor Rule," Department of Economics - Working Papers Series 1131, The University of Melbourne.
  5. Michael P. Clements & Ana Beatriz Galv�o, 2011. "Improving Real-time Estimates of Output Gaps and Inflation Trends with Multiple-vintage Models," Working Papers 678, Queen Mary, University of London, School of Economics and Finance.
  6. Anthony Garratt & Kevin Lee & Kalvinder Shields, 2014. "Forecasting Global Recessions in a GVAR Model of Actual and Expected Output in the G7," Discussion Papers 2014/06, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  7. Jennifer Castle & David Hendry, 2012. "Forecasting by factors, by variables, or both?," Economics Series Working Papers 600, University of Oxford, Department of Economics.
  8. Clements, Michael P. & Galvão, Ana Beatriz, 2013. "Forecasting with vector autoregressive models of data vintages: US output growth and inflation," International Journal of Forecasting, Elsevier, vol. 29(4), pages 698-714.

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