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Output Gap Estimation, Estimation Uncertainty and its Effect on Policy Rules

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  • Juan Manuel Julio R.

    ()

  • Javier Gómez P.

Abstract

The authors propose a short run model for the monetary transmission mechanism in which the output gap is model as an unobserved variable. By estimating this model using maximum likelihood on a Kalman Filter, the authors find an estimate of the unobserved output gap as well as its estimation uncertainty. The performance of monetary rules is studied both with certainty on the output gap values as well as with estimation uncertainty.

Suggested Citation

  • Juan Manuel Julio R. & Javier Gómez P., 1998. "Output Gap Estimation, Estimation Uncertainty and its Effect on Policy Rules," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 17(34), pages 89-117, December.
  • Handle: RePEc:col:000107:005410
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    References listed on IDEAS

    as
    1. Glenn Rudebusch & Lars E.O. Svensson, 1999. "Policy Rules for Inflation Targeting," NBER Chapters,in: Monetary Policy Rules, pages 203-262 National Bureau of Economic Research, Inc.
    2. Frank Smets, 2002. "Output gap uncertainty: Does it matter for the Taylor rule?," Empirical Economics, Springer, vol. 27(1), pages 113-129.
    3. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Juan Manuel Julio, 2001. "How Uncertain are NAIRU Estimates in Colombia?," BORRADORES DE ECONOMIA 002798, BANCO DE LA REPÚBLICA.
    2. Martha Misas A. & Carlos Esteban Posada P & Diego Mauricio Vásquez E, 2003. "¿Está determinado el nivel de precios por las expectativas de dinero y producto en Colombia?," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 21(43), pages 8-31, June.
    3. Gloria Lucía Bernal Nisperuza & Johanna Táutiva Pradere, 2008. "Relevancia de los datos en tiempo real en la estimación de la regla de Taylor para Colombia," Documentos de Economía 005421, Universidad Javeriana - Bogotá.
    4. Andrés González & Segio Ocampo & Julián Pérez & Diego Rodríguez, 2013. "Output Gap and Neutral Interest Measures of Colombia," Monetaria, Centro de Estudios Monetarios Latinoamericanos, CEMLA, vol. 0(2), pages 231-286, July-Dece.
    5. Julio, Juan Manuel & Cobo, Adolfo, 2000. "The Relationship between Wages and Prices in Colombia," MPRA Paper 29069, University Library of Munich, Germany, revised 18 Jul 2000.
    6. Martha Misas A & Enrique López E, 2001. "Desequilibrios Reales En Colombia," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 19(40), pages 5-45, December.
    7. Gloria Lucía Bernal Nisperuza & Johanna Táutiva Pradere, 2011. "Datos en tiempo real:una aplicación a la regla de taylor en Colombia," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 13(24), pages 373-394, January-J.
    8. Remberto Rhenals & Juan Pablo Saldarriaga, 2008. "An Optimal Taylor Rule for Colombia, 1991-2006," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 69, pages 9-39, Julio-Dic.
    9. Juan Manuel Julio Román, 2006. "The Monetary Policy Rule During The Transition To A Stable Level Of Inflation: The Case Of Colombia," Borradores de Economia 404, Banco de la Republica de Colombia.
    10. Jorge Enrique Restrepo Londoño, 1998. "Reglas monetarias en una economía pequeña y abierta," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 17(33), pages 61-84, July.
    11. repec:bdr:ensayo:v::y:2003:i:43:p:8-31 is not listed on IDEAS
    12. Jesus Otero & Manuel Ramirez, 2002. "On the determinants of the inflation rate in Colombia: a disequilibrium market approach," Borradores de Investigación 003296, Universidad del Rosario.
    13. Rhenals M., Remberto & Saldarriaga, Juan Pablo, 2008. "Una regla de Taylor óptima para Colombia, 1991-2006," Revista Lecturas de Economía, Universidad de Antioquia - CIE, November.
    14. repec:eee:ecosys:v:41:y:2017:i:3:p:389-407 is not listed on IDEAS
    15. Amador-Torres, J. Sebastián, 2017. "Finance-neutral potential output: An evaluation in an emerging market monetary policy context," Economic Systems, Elsevier, vol. 41(3), pages 389-407.

    More about this item

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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