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Real time Representations of the Output Gap

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Author Info

  • Kevin Lee

    (University of Leicester)

  • Emi Mise

    (University of Leicester)

  • Kalvinder Shields

    (Melbourne)

  • Tony Garratt

    (Birkbeck College)

Abstract

Methods are described for the appropriate use of data obtained and analysed in real time to represent the output gap. The methods employ cointegrating VAR techniques to model real time measures and realisations of output series jointly. The model is used to mitigate the impact of data revisions; to generate appropriate forecasts that can deliver economically-meaningful output trends and that can take into account the end-of-sample problems associated with the use of the Hodrick-Prescott filter in measuring these trends; and to calculate probability forecasts that convey in a clear way the uncertainties associated with the gap measures. The methods are applied to data for the US 1965q4-2004q4 and the improvements over standard methods are illustrated.

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Bibliographic Info

Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2005 with number 26.

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Date of creation: 03 Sep 2005
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Handle: RePEc:mmf:mmfc05:26

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Web page: http://www.essex.ac.uk/afm/mmf/index.html

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