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Monitoring the Economy in Real Time: Trends and Gaps in Real Activity and Prices

Author

Listed:
  • Thomas Hasenzagl
  • Filippo Pellegrino
  • Lucrezia Reichlin
  • Giovanni Ricco

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

A mixed-frequency semi-structural model is used for estimating unobservable quantities such as the output gap, the Phillips curve and the NAIRU in real time. We consider two specifications for the US: in one the output gap is observed as the official CBO measure, in the other is unobserved and derived via minimal theory-based restrictions. We find that the CBO model implies a smoother trend output but the second model better captures the business cycle dynamics of nominal and real variables. The methodology offers both a framework for evaluating official estimates of unobserved quantities of economic interest and for tracking them in real time.

Suggested Citation

  • Thomas Hasenzagl & Filippo Pellegrino & Lucrezia Reichlin & Giovanni Ricco, 2022. "Monitoring the Economy in Real Time: Trends and Gaps in Real Activity and Prices," Working Papers hal-03573080, HAL.
    • Handle: RePEc:hal:wpaper:hal-03573080
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03573080
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    References listed on IDEAS

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    1. Giannone, Domenico & Reichlin, Lucrezia & Small, David, 2008. "Nowcasting: The real-time informational content of macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 665-676, May.
    2. Lucrezia Reichlin & Giovanni Ricco & Thomas Hasenzagl, 2020. "Financial Variables as Predictors of Real Growth Vulnerability," Documents de Travail de l'OFCE 2020-06, Observatoire Francais des Conjonctures Economiques (OFCE).
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    Cited by:

    1. Matteo Barigozzi & Filippo Pellegrino, 2023. "Multidimensional dynamic factor models," Papers 2301.12499, arXiv.org.

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    More about this item

    Keywords

    Real-time forecasting; output gap; Phillips curve; semi-structural models; Bayesian estimation;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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