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Construction of a survey-based measure of output Gap


  • Michal Bencik

    () (National Bank of Slovakia)


The output gap derived by conventional methods is dependent on data from national accounts statistics. Consequently, the output gap is usually the subject of significant updates if hard data are revised. Reliability of output gap estimates can also be affected by properties of the applied method, for instance the end-point problem (e.g. in the commonly used HP filter). The aim of this paper is to offer a solid methodology to measure output gap using exclusively the output series and surveys that allow for a less uncertain assessment, while eliminating the endpoint problem. We present and apply a method of constructing the output gap from surveys in Slovakia. The method consists of principal component analysis and Kalman smoother applied to the first principal component. The path of the resulting output gap is fairly similar to the path of other measures of output gap, but its revisions (especially during the outbreak of the Great Financial Crisis) are smaller than those of traditional measures.

Suggested Citation

  • Michal Bencik, 2019. "Construction of a survey-based measure of output Gap," Working and Discussion Papers WP 3/2019, Research Department, National Bank of Slovakia.
  • Handle: RePEc:svk:wpaper:1061

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    Output Gap; Survey Indicators; Principal Components; Kalman Filter;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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