Measuring the Natural Output Gap Using Actual and Expected Output Data
AbstractAn output gap measure is suggested based on a multivariate Beveridge-Nelson decomposition of output using a vector-autoregressive model that includes data on actual output and on expected output obtained from surveys. The gap is estimated using an integrated approach to identifying permanent and different types of transitory shocks to output. The gap has a statistical basis but is provided economic meaning by relating it to natural output in DSGE models. The approach is applied to quarterly US data over 1970q1-2007q4. Estimated gaps have sensible statistical properties and perform well in explaining inflation in estimates of New Keynesian Phillips curves.
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Bibliographic InfoPaper provided by University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) in its series Discussion Papers with number 10/07.
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Trend Output; Natural Output Level; Output Gap; Beveridge-Nelson Decomposition; Survey-based Expectations; New Keynesian Phillips Curve.;
Other versions of this item:
- Anthony Garratt & Kevin Lee & Kalvinder Shields, 2009. "Measuring the Natural Output Gap using Actual and Expected Output Data," Birkbeck Working Papers in Economics and Finance, Birkbeck, Department of Economics, Mathematics & Statistics 0911, Birkbeck, Department of Economics, Mathematics & Statistics.
- Kevin Lee & Anthony Garratt & Kalvinder Shields, 2009. "Measuring the Natural Output Gap using Actual and Expected Output Data," Discussion Papers in Economics, Department of Economics, University of Leicester 09/21, Department of Economics, University of Leicester.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andres, Javier & Lopez-Salido, J. David & Nelson, Edward, 2005.
"Sticky-price models and the natural rate hypothesis,"
Journal of Monetary Economics, Elsevier,
Elsevier, vol. 52(5), pages 1025-1053, July.
- Javier Andrés & David López-Salido & Edward Nelson, 2005. "Sticky-Price Models and the Natural Rate Hypothesis," Banco de Espaï¿½a Working Papers, Banco de Espaï¿½a 0521, Banco de Espa�a.
- Javier Andres & J. David López-Salido & Edward Nelson, 2005. "Sticky-price models and the natural rate hypothesis," Working Papers, Federal Reserve Bank of St. Louis 2005-018, Federal Reserve Bank of St. Louis.
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