Output gap and inflation nexus: the case of United Arab Emirates
Output gap is generally used in assessing both the inflationary pressures and the cyclical position of a nation's economy. However, this variable is not observable and must be estimated. In this article, we accomplish two tasks. First, we estimate the output gap for the United Arab Emirates (UAE) using four different statistical methods. Second, we evaluate to what extent do the fluctuations of output gap, however measured, are a good predictors of inflation in the UAE. This is carried out by comparing the out-of-sample forecasts generated by the output gap-based models to those of the model with alternative indicators and the benchmark models. Interestingly, although the different measures of output gap produce a broadly similar profile of the UAE business cycles, we could not find any statistical evidence that this variable is a useful predictor of inflation in the UAE.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 1 (2009)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.inderscience.com/browse/index.php?journalID==310|
References listed on IDEAS
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.:
- Angel J. Ubide & Kevin Ross, 2001. "Mind the Gap; What is the Best Measure of Slack in the Euro Area?," IMF Working Papers 01/203, International Monetary Fund.
- El-Sakka M. I. T. & Ghali Khalifa H, 2005. "The Sources of Inflation in Egypt: A Multivariate Co-integration Analysis," Review of Middle East Economics and Finance, De Gruyter, vol. 3(3), pages 84-96, December.
- Athanasios Orphanides & Simon van Norden, 2003.
"The Reliability of Inflation Forecasts Based on Output Gap Estimates in Real Time,"
CIRANO Working Papers
- Orphanides, Athanasios & van Norden, Simon, 2005. "The Reliability of Inflation Forecasts Based on Output Gap Estimates in Real Time," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(3), pages 583-601, June.
- Athanasios Orphanides & Simon van Norden, 2004. "The reliability of inflation forecasts based on output gap estimates in real time," Finance and Economics Discussion Series 2004-68, Board of Governors of the Federal Reserve System (U.S.).
- Orphanides, Athanasios & van Norden, Simon, 2005. "The Reliability of Inflation Forecasts Based on Output Gap Estimates in Real Time," CEPR Discussion Papers 4830, C.E.P.R. Discussion Papers.
- Richard Clarida & Jordi Gali & Mark Gertler, 1997.
"Monetary Policy Rules in Practice: Some International Evidence,"
NBER Working Papers
6254, National Bureau of Economic Research, Inc.
- Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
- Clarida, Richard & Gali, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," Working Papers 97-32, C.V. Starr Center for Applied Economics, New York University.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," CEPR Discussion Papers 1750, C.E.P.R. Discussion Papers.
- Lei Lei Song, 2005. "Do underlying measures of inflation outperform headline rates? Evidence from Australian data," Applied Economics, Taylor & Francis Journals, vol. 37(3), pages 339-345.
- Richard H. Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary policy rules in practice," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
- Clark, Peter K., 1989. "Trend reversion in real output and unemployment," Journal of Econometrics, Elsevier, vol. 40(1), pages 15-32, January.
- Diebold, Francis X & Mariano, Roberto S, 2002.
"Comparing Predictive Accuracy,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 20(1), pages 134-44, January.
- Prakash Loungani & Phillip L Swagel, 2001. "Sources of Inflation in Developing Countries," IMF Working Papers 01/198, International Monetary Fund.
- St-Amant, P. & van Norden, S., 1997. "Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada," Technical Reports 79, Bank of Canada.
- Michael Graff, 2004. "Estimates of the output gap in real time: how well have we been doing?," Reserve Bank of New Zealand Discussion Paper Series DP 2004/04, Reserve Bank of New Zealand.
- Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
- Iris Claus, 2000. "Is the output gap a useful indicator of inflation?," Reserve Bank of New Zealand Discussion Paper Series DP2000/05, Reserve Bank of New Zealand.
- Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, vol. 18(1), pages 49-75, July.
When requesting a correction, please mention this item's handle: RePEc:ids:ijecbr:v:1:y:2009:i:1:p:118-135. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Graham Langley)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.