IDEAS home Printed from
   My bibliography  Save this paper

Central Bank Estimates of the Unemployment Natural Rate


  • Peter Tinsley
  • Sharon Kozicki

    () (Visitor, Department of Economics George Washington University)


This paper uses real-time data and forecasts provided in historical briefing documents prepared for the Federal Open Market Committee of the United States Federal Reserve to estimate evolving central bank perceptions of the natural rate of unemployment. The briefing documents, informally known as Greenbooks, provide a unique real-time assessment of economic conditions and central bank forecasts. This paper discusses computational challenges and advantages of the Greenbook data and provides real-time estimates of the natural rate of unemployment implicit in Greenbook forecasts. Use of the Greenbook data provides several advantages over other real-time data sources. The multiperiod forecasts in a Greenbook provide repeated observations of the implicit forecast model at a given date. Importantly, Greenbook forecasts provide measures of real-time central bank perceptions that are not evident in real-time data releases. Thus, use of Greenbook forecast data provides sufficient summary measures of the ex ante information of forecasters, reduces model identification issues, and eliminates estimation biases due to unanticipated disturbances in ex post data. Despite the potential advantages, previous studies have generally limited their analysis to a subset of the Greenbook data. Some data are typically excluded because the reporting format of the dataset presents several computational challenges, including variations in the number of Greenbooks per year, differing forecast horizons per Greenbook, and the influence of judgmental add factors on near-term forecasts. An important contribution of this paper is the proposed methodology that potentially allows use of the entire data set rather than ad-hoc selections of data subsets. The paper assumes an economic structure in which the status of economic activity and the prospects for future inflation depend on how much the unemployment rate deviates from its natural rate. The structure is embedded in a time-varying parameter framework to provide improved estimates of real-time Greenbook perceptions of the natural rate of unemployment. These estimates are then used to reassess the size of central bank measurement errors of the unemployment natural rate since 1970 and interpretations of central bank forecasts and policy attributed to natural rate measurement errors.

Suggested Citation

  • Peter Tinsley & Sharon Kozicki, 2005. "Central Bank Estimates of the Unemployment Natural Rate," Computing in Economics and Finance 2005 138, Society for Computational Economics.
  • Handle: RePEc:sce:scecf5:138

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Sharon Kozicki & Peter A. Tinsley, 2005. "Perhaps the FOMC did what it said it did : an alternative interpretation of the Great Inflation," Research Working Paper RWP 05-04, Federal Reserve Bank of Kansas City.

    More about this item


    monetary policy; time-varying parameter; real-time data;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sce:scecf5:138. 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). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.