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Unobservable-Component Estimates of Output Gaps in Five Asian Economies

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Author Info

  • Stefan Gerlach

    (University of Basel and CEPR)

  • Matthew S. Yiu

    (Hong Kong Institute of Monetary Research)

Abstract

This paper estimates output gaps for Hong Kong, Korea, the Philippines, Singapore and Taiwan, employing the HP filter and unobservable-components (UC) techniques. The latter approach assumes that actual output is the sum of potential output, which follows a random walk with a time-varying drift, and a stationary output gap. While the results imply that UC methods are useful in estimating output gaps in Asia, simple Phillips curves suggest that the information contents of the two measures of the gap are essentially identical. The main advantage of the UC technique is that it allows the construction of confidence bands for the gap.

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Bibliographic Info

Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 052002.

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Length: 22 pages
Date of creation: Feb 2002
Date of revision:
Handle: RePEc:hkm:wpaper:052002

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Keywords: C5; E3;

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References

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  1. Clark, Peter K., 1989. "Trend reversion in real output and unemployment," Journal of Econometrics, Elsevier, Elsevier, vol. 40(1), pages 15-32, January.
  2. King, R.G. & Rebelo, S.T., 1989. "Low Frequency Filtering And Real Business Cycles," RCER Working Papers 205, University of Rochester - Center for Economic Research (RCER).
  3. Bank for International Settlements, 2001. "Modelling aspects of the inflation process and the monetary transmission mechanism in emerging market countries," BIS Papers, Bank for International Settlements, Bank for International Settlements, number 08, 8.
  4. Bank for International Settlements, 2001. "Empirical studies of structural changes and inflation," BIS Papers, Bank for International Settlements, Bank for International Settlements, number 03, 8.
  5. James H. Stock & Mark W. Watson, 1988. "A Probability Model of The Coincident Economic Indicators," NBER Working Papers 2772, National Bureau of Economic Research, Inc.
  6. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, Elsevier, vol. 18(1), pages 49-75, July.
  7. Gerlach, Stefan & Smets, Frank, 1999. "Output gaps and monetary policy in the EMU area1," European Economic Review, Elsevier, Elsevier, vol. 43(4-6), pages 801-812, April.
  8. Kuttner, Kenneth N, 1994. "Estimating Potential Output as a Latent Variable," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 12(3), pages 361-68, July.
  9. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, Elsevier, vol. 7(2), pages 151-174.
  10. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 39(1), pages 195-214, December.
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Cited by:
  1. Hans Genberg, 2003. "Foreign versus domestic factors as sources of macroeconomic fluctuations in Hong Kong," IHEID Working Papers, Economics Section, The Graduate Institute of International Studies 05-2003, Economics Section, The Graduate Institute of International Studies.

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