Real-time output gaps in the estimation of Taylor rules: A red herring?
Real-time, quasi-real, `nearly real` and full sample output gaps for the UK, generated by linear and quadratic, Hodrick-Prescott filter and unobserved components (UC-ARIMA) techniques, are presented and analysed. Particular attention is paid to the behaviour of the different series during the large fluctuations of the late 1980s and early 1990s, and the implied underlying trends of potential output are identified. In that period the rolling-time estimation of the real time and quasi-real gaps involves systematic distortion. After 1994, by contrast, the various measures are closer together, and the choice between them is less important. None of these measures corresponds precisely to what researchers would like - the output gap as understood at the time by policymakers - which it seems nearly impossible to identify with (non-spurious) precision but, given the nature and purpose of Taylor rule estimations, imperfect measures are acceptable. For periods with large swings researchers should settle for the nearly real series, while for more stable periods the choice of measure makes little difference.
(This abstract was borrowed from another version of this item.)
|Date of creation:||03 Sep 2005|
|Contact details of provider:|| Web page: http://www.essex.ac.uk/afm/mmf/index.html|
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.:
- Christopher Adam & David Cobham & Eric Girardin, 2005. "Monetary Frameworks and Institutional Constraints: UK Monetary Policy Reaction Functions, 1985-2003," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(4), pages 497-516, August.
When requesting a correction, please mention this item's handle: RePEc:mmf:mmfc05:42. 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: (Christopher F. Baum)
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.