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Real time representation of the UK output gap in the presence of model uncertainty

Listed author(s):
  • Garratt, Anthony
  • Lee, Kevin
  • Mise, Emi
  • Shields, Kalvinder

We undertake an empirical analysis of the UK output gap using real-time data and an approach that accommodates, in a coherent way, three types of uncertainty when measuring the gap. These are model uncertainty (associated with the choice of model and de-trending technique), estimation uncertainty (with a given model) and measurement uncertainty (associated with the reliability of the data). The approach employs VAR models, along with Bayesian-style 'model averaging' procedures, to jointly explain and forecast real-time measures and realisations of output series. A comprehensive representation of the UK output gap and the associated uncertainties are provided in real time by probability forecasts over 1961q2-2005q4.

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File URL: http://www.sciencedirect.com/science/article/pii/S0169-2070(08)00137-4
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Article provided by Elsevier in its journal International Journal of Forecasting.

Volume (Year): 25 (2009)
Issue (Month): 1 ()
Pages: 81-102

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Handle: RePEc:eee:intfor:v:25:y:2009:i:1:p:81-102
Contact details of provider: Web page: http://www.elsevier.com/locate/ijforecast

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  1. Carl Walsh, 2003. "Speed Limit Policies: The Output Gap and Optimal Monetary Policy," American Economic Review, American Economic Association, vol. 93(1), pages 265-278, March.
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  11. Garratt, Anthony & Lee, Kevin & Pesaran, M. Hashem & Shin, Yongcheol, 2012. "Global and National Macroeconometric Modelling: A Long-Run Structural Approach," OUP Catalogue, Oxford University Press, number 9780199650460.
  12. Patterson, Kerry, 2002. "The Data Measurement Process for UK GNP: Stochastic Trends, Long Memory, and Unit Roots," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 21(4), pages 245-264, July.
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