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Minding the Gap: Central Bank Estimates of the Unemployment Natural Rate

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  • Sharon Kozicki
  • P. Tinsley

Abstract

A time-varying parameter framework is suggested for use with real-time multiperiod forecast data to estimate implied forecast equations. The framework is applied to historical briefing forecasts prepared for the Federal Open Market Committee to estimate the U.S. central bank?s ex ante perceptions of the natural rate of unemployment. Relative to retrospective estimates, empirical results do not indicate severe underestimation of the natural rate of unemployment in the 1970s.
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  • Sharon Kozicki & P. Tinsley, 2006. "Minding the Gap: Central Bank Estimates of the Unemployment Natural Rate," Computational Economics, Springer;Society for Computational Economics, vol. 27(2), pages 295-327, May.
    • Handle: RePEc:kap:compec:v:27:y:2006:i:2:p:295-327
    DOI: 10.1007/s10614-006-9029-3
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    1. Kozicki, Sharon & Tinsley, P.A., 2009. "Perhaps the 1970s FOMC did what it said it did," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 842-855, September.
    2. Carboni, Giacomo & Ellison, Martin, 2011. "Inflation and output volatility under asymmetric incomplete information," Journal of Economic Dynamics and Control, Elsevier, vol. 35(1), pages 40-51, January.
    3. Nikolsko-Rzhevskyy, Alex & Papell, David H., 2012. "Taylor rules and the Great Inflation," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 903-918.
    4. Carboni, Giacomo & Ellison, Martin, 2009. "The Great Inflation and the Greenbook," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 831-841, September.
    5. Sharon Kozicki & Peter A. Tinsley, 2005. "Perhaps the FOMC did what it said it did : an alternative interpretation of the Great Inflation," Research Working Paper RWP 05-04, Federal Reserve Bank of Kansas City.

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