Measuring the Natural Output Level by DSGE Models: An Empirical Investigation for Switzerland
AbstractThe output gap plays an important role in the assessment and conduct of monetary policy. Most of the current literature, however, relies on filtering procedures which use ad hoc smoothness arguments for identification. Furthermore, they are subject to end-of-sample problems and do not provide estimates of the output gap based on economic theory. In contrast, our model-based approach relies on a precise definition of the natural level of output and consequently of the output gap. This paper provides, for the first time, an estimate of the output gap based on a DSGE small open economy model for Switzerland. We use Bayesian econometrics to derive an estimate of the output gap, which is then compared to some alternatives. Except for the last years, our measure of the output gap is close to zero most of the time. This suggests that price rigidities play a minor role in the propagation of the Swiss business cycle. We show that our estimate produces sensible and robust results which encourage further research.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.
Volume (Year): 146 (2010)
Issue (Month): I (March)
Contact details of provider:
Postal: c/o SNB/BNS, Börsenstrasse 15, PO Box 2800, CH-8022 Zürich
Phone: +41 (0)44 631 32 34
Fax: +41 (0)44 631 39 01
Web page: http://www.sjes.ch
More information through EDIRC
DSGE models; Bayesian econometrics; output gap; natural level of output; small open economy;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Steiner).
If references are entirely missing, you can add them using this form.