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Improving Real-time Estimates of Output Gaps and Inflation Trends with Multiple-vintage Models

Author

Listed:
  • Michael P. Clements

    () (University of Warwick)

  • Ana Beatriz Galvão

    (Queen Mary, University of London)

Abstract

Real-time estimates of output gaps and inflation trends differ from the values that are obtained using data available long after the event. Part of the problem is that the data on which the real-time estimates are based is subsequently revised. We show that vector-autoregressive models of data vintages provide forecasts of post-revision values of future observations and of already-released observations capable of improving real-time output gap and inflation trend estimates. Our findings indicate that annual revisions to output and inflation data are in part predictable based on their past vintages.

Suggested Citation

  • Michael P. Clements & Ana Beatriz Galvão, 2011. "Improving Real-time Estimates of Output Gaps and Inflation Trends with Multiple-vintage Models," Working Papers 678, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:wp678
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    File URL: http://www.econ.qmul.ac.uk/media/econ/research/workingpapers/archive/wp678.pdf
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    References listed on IDEAS

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    Cited by:

    1. Emilia Tomczyk, 2013. "End of sample vs. real time data: perspectives for analysis of expectations," Working Papers 68, Department of Applied Econometrics, Warsaw School of Economics.

    More about this item

    Keywords

    Revisions; Real-time forecasting; Output gap; Inflation trend;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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