Estimating Gaps and Trends for the Chilean Economy
Trend GDP and the output gap are key inputs for policy evaluation and forecasting in standard models of monetary policy. However, the measurement of these variables is plagued with difficulties. In this paper we propose two different approaches. First, a data-based approach, that starts with the primal and dual estimates of total factor productivity (TFP) growth, and then uses a variety of procedures to filter the inputs. Second, a model-consistent framework that simultaneously estimates the macroeconomic dynamics and the underlying trends of the economy. We compare the difficulties in using each methodology, and we use them to construct measures of the output gap and potential growth for Chile
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- Pablo García & Luis Óscar Herrera & Rodrigo O. Valdés, 2002.
"New Frontiers for Monetary Policy in Chile,"
Central Banking, Analysis, and Economic Policies Book Series,in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Inflation Targeting: Desing, Performance, Challenges, edition 1, volume 5, chapter 15, pages 627-649
Central Bank of Chile.
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