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Measuring a Roller Coaster: Evidence on the Finnish Output Gap Author info | Abstract | Publisher info | Download info | Related research | Statistics Andreas Billmeier () (Middle East and Central Asia Department, International Monetary Fund, USA)
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The output gap – which measures the deviation of actual output from its potential – is frequently used as an indicator of slack in an economy. This article estimates the Finnish output gap using various empirical methods. It evaluates these methods against economic history and each other by a simulated out-of-sample forecasting exercise for Finnish CPI inflation. Only two gap measures, stemming from a frequency-domain approach and the Blanchard-Quah decomposition, perform better than the naïve prediction of no change in inflation – but do not improve upon a simple autoregressive forecast. The pronounced volatility of output in Finland makes it particularly difficult to estimate potential output, producing considerable uncertainty about the size (and sign) of the gap.
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Article provided by Finnish Economic Association in its journal Finnish Economic Papers .
Volume (Year): 19 (2006)
Issue (Month): 2 (Autumn)
Pages: 69-83
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Handle: RePEc:fep:journl:v:19:y:2006:i:2:p:69-83Contact details of provider: Web page: http://www.taloustieteellinenyhdistys.fi More information through EDIRC
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Find related papers by JEL classification: E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation
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