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Improving the reliability of real-time Hodrick-Prescott filtering using survey forecasts

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  • Jaqueson K. Galimberti
  • Marcelo L. Moura

Abstract

Incorporating survey forecasts to a forecast-augmented Hodrick-Prescott filter, we evidence a considerable improvement to the reliability of US output-gap estimation in realtime. Odds of extracting wrong signals of output-gap estimates are found to reduce by almost a half, and the magnitude of revisions to these estimates accounts to only three fifths of the output-gap average size, usually an one-by-one ratio. We further analyze how this end-of-sample uncertainty evolves as time goes on and observations accumulate, showing that a 90% rate of correct assessments of the output-gap sign can be attained with five quarters of delay using survey forecasts.

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File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/cgbcr/discussionpapers/dpcgbcr159.pdf
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Bibliographic Info

Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 159.

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Length: 21 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:man:cgbcrp:159

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Cited by:
  1. Galimberti, Jaqueson K. & Moura, Marcelo L., 2013. "Taylor rules and exchange rate predictability in emerging economies," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 1008-1031.

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