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Bayesian analysis of output gap in Barbados

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  • Agbeyegbe, Terence D.

Abstract

This article contributes to understanding the performance of various unobserved components (UC) models in fitting Barbados’ real GDP. Relying on recent UC models techniques, it finds support for the UC model that captures correlated disturbances, but not for the model that does not. The best model is the correlated UC model with two breaks: 1981 and 2008. Estimates show that the trend and cycle innovations are positively correlated. There is evidence suggesting that trend output growth has slowdown in the past decade. The Bayes factor result indicates that the GDP trend is better modeled as a stochastic process rather than a deterministic one.

Suggested Citation

  • Agbeyegbe, Terence D., 2020. "Bayesian analysis of output gap in Barbados," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).
    • Handle: RePEc:eee:lajcba:v:1:y:2020:i:1:s266614382030020x
    DOI: 10.1016/j.latcb.2020.100020
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    Cited by:

    1. Terence D. Agbeyegbe, 2023. "The Link Between Output Growth and Output Growth Volatility: Barbados," Annals of Data Science, Springer, vol. 10(3), pages 787-804, June.

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    More about this item

    Keywords

    Output gap; Unobserved Component; Trend; Caribbean;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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