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Data Revisions and the Output Gap

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  • Juan Manuel Julio

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Abstract

Preliminary and delayed Colombian GDP reports are replaced with optimal in-sample now-casts of "true" GDP figures derived from a model for data revisions. The new GDP time series is augmented with optimal out-of-sample forecasts and back-casts of the "true" GDP figures derived from the same model. The trend-cycle component of the augmented GDP series is filtered. The resulting gap is more resistant than the ordinary HP filter to the end of sample optimal filtering problem as well as to GDP revisions and delays. The short term noise of the final output gap estimate is also reduced. Adjusting for data revisions and delays reduce the uncertainty of estimated gaps. The extended and further extended HP estimates of the output gap show an impressive efficiency gain with respect to the ordinary HP gap, 43% and 47% respectively, on average. The new extension increases the efficiency in 7.4%, on average, with respect to extended HP estimates. These results constitute a benchmark to future work on real time estimation of the output gap under GDP revisions and delays in Colombia.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 642.

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Handle: RePEc:bdr:borrec:642

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Related research

Keywords: Data Revisions; Now-casting; Real Time Economic Analysis. Classification JEL: C22; C53; C82.;

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References

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  1. James Mitchell & Garratt, A., Vahey, S.P., 2009. "Measuring Output Gap Uncertainty," NIESR Discussion Papers 342, National Institute of Economic and Social Research.
  2. Juan Manuel Julio, . "Modeling Data Revisions," Borradores de Economia 641, Banco de la Republica de Colombia.
  3. Aruoba, Boragan, 2005. "Data Revisions Are Not Well-Behaved," CEPR Discussion Papers 5271, C.E.P.R. Discussion Papers.
  4. Alejandro López & Carolina Gómez & Norberto Rodríguez, 1996. "La caida de la tasa de Ahorro en Colombia durante los años noventa: Evidencia a partir de una base de datos para el período 1950-1993," BORRADORES DE ECONOMIA 002945, BANCO DE LA REPÚBLICA.
  5. Regina Kaiser & Agustín Maravall, 2004. "Combining filter design with model based filtering (with an application to business cycle estimation)," Banco de España Working Papers 0417, Banco de España.
  6. Jacobs, Jan P.A.M. & van Norden, Simon, 2011. "Modeling data revisions: Measurement error and dynamics of "true" values," Journal of Econometrics, Elsevier, vol. 161(2), pages 101-109, April.
  7. Regina Kaiser & Agustín Maravall, 1999. "Estimation of the Business Cycle: a Modified Hodrick-Prescott Filter," Banco de España Working Papers 9912, Banco de España.
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Cited by:
  1. Julio Roman, Juan Manuel, 2011. "The Hodrick-Prescott filter with priors: linear restrictions on HP filters," MPRA Paper 34202, University Library of Munich, Germany.

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