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Uncertainty in the Estimation of Potential Output and Implications for the Conduct of Monetary Policy

  • Sra Chuenchoksan

    (Bank of Thailand)

  • Don Nakornthab

    (Bank of Thailand)

  • Surach Tanboon

    (Bank of Thailand)

Registered author(s):

    This paper looks at the implications of uncertainty in potential output estimation for the conduct of monetary policy. Our findings of potential output and the output gap for Thailand are based on commonly used methods such as the Hodrick-Prescott filter and unobserved component models. Estimation problems associated with real-time data, parameter uncertainty, and model uncertainty are investigated. In dealing with such uncertainties, we review various solutions from both theoretical and practical aspects of monetary policy design.

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    Paper provided by Economic Research Department, Bank of Thailand in its series Working Papers with number 2008-04.

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    Length: 52 pages
    Date of creation: Apr 2008
    Date of revision:
    Handle: RePEc:bth:wpaper:2008-04
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    9. Andrew Levin & Volker Wieland & John C. Williams, 1998. "Robustness of simple monetary policy rules under model uncertainty," Finance and Economics Discussion Series 1998-45, Board of Governors of the Federal Reserve System (U.S.).
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    16. Richard Clarida & Jordi Gali & Mark Gertler, 2001. "Optimal Monetary Policy in Closed versus Open Economies: An Integrated Approach," NBER Working Papers 8604, National Bureau of Economic Research, Inc.
    17. Odile Chagny & Jörg Döpke, 2001. "Measures of the Output Gap in the Euro-Zone: An Empirical Assessment of Selected Methods," Kiel Working Papers 1053, Kiel Institute for the World Economy.
    18. Kai Leitemo & Ulf Soderstrom, 2001. "Simple monetary policy rules and exchange rate uncertainty," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    19. Katharine Neiss & Edward Nelson, 2002. "Inflation dynamics, marginal cost, and the output gap: evidence from three countries," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    20. Blinder, Alan S & Morgan, John, 2005. "Are Two Heads Better than One? Monetary Policy by Committee," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 789-811, October.
    21. Kuttner, Kenneth N, 1994. "Estimating Potential Output as a Latent Variable," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 361-68, July.
    22. Jaromír Beneš & Andrew Binning & Kirdan Lees, 2008. "Incorporating judgement with DSGE models," Reserve Bank of New Zealand Discussion Paper Series DP2008/10, Reserve Bank of New Zealand.
    23. Leitemo, Kai & Lonning, Ingunn, 2006. "Simple Monetary Policymaking without the Output Gap," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1619-1640, September.
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