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Real-time Data for Norway: Challenges for Monetary Policy

  • Bernhardsen, Tom
  • Eitrheim, Øyvind
  • Jore, Anne Sofie
  • Røisland, Øistein

National accounts data are always revised. Not only recent data, but also figures dating many years back can be revised substantially. This means that there is a danger that an important part of the central bank's information set is flawed for a long period of time. In this paper we present a data base consisting of various vintages of real-time data from 1993Q1 to 2003Q4. We describe the nature of the data revisions, the causes of the revisions, and investigate whether the revisions are true martingale differences, or whether they can be forecasted. In the spirit of Orphanides and van Norden (2002), we analyze how data revisions and model uncertainty affect the reliability of output gap estimates. We also compare Taylor type interest rate rules based on real-time data versus final data and assess the consequences for monetary policy if policy was conducted using this type of interest rate rules. Finally, we analyze the implications of output gap uncertainty for monetary policy using a small New Keynesian macroeconomic model.

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2004,26.

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Date of creation: 2004
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Handle: RePEc:zbw:bubdp1:2292
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  1. Athanasios Orphanides & Simon van Norden, 2002. "The Unreliability of Output-Gap Estimates in Real Time," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 569-583, November.
  2. Tom Stark & Dean Croushore, 2001. "Forecasting with a real-time data set for macroeconomists," Working Papers 01-10, Federal Reserve Bank of Philadelphia.
  3. Athanasios Orphanides & Simon van Norden, 2004. "The reliability of inflation forecasts based on output gap estimates in real time," Finance and Economics Discussion Series 2004-68, Board of Governors of the Federal Reserve System (U.S.).
  4. Svensson, Lars & Woodford, Michael, 2000. "Indicator Variables for Optimal Policy," Seminar Papers 688, Stockholm University, Institute for International Economic Studies.
  5. Michael Woodford, 1999. "Optimal Monetary Policy Inertia," NBER Working Papers 7261, National Bureau of Economic Research, Inc.
  6. Bernhardsen, Tom & Eitrheim, Øyvind & Jore, Anne Sofie & Røisland, Øistein, 2004. "Real-time Data for Norway: Challenges for Monetary Policy," Discussion Paper Series 1: Economic Studies 2004,26, Deutsche Bundesbank, Research Centre.
  7. Harvey, A C, 1985. "Trends and Cycles in Macroeconomic Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 216-27, June.
  8. Sharon Kozicki, 2004. "How do data revisions affect the evaluation and conduct of monetary policy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 5-38.
  9. Clark, Peter K, 1987. "The Cyclical Component of U.S. Economic Activity," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 797-814, November.
  10. Athanasios Orphanides & Richard D. Porter & David Reifschneider & Robert Tetlow & Frederico Finan, 1999. "Errors in the measurement of the output gap and the design of monetary policy," Finance and Economics Discussion Series 1999-45, Board of Governors of the Federal Reserve System (U.S.).
  11. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, vol. 18(1), pages 49-75, July.
  12. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  13. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
  14. Jon Faust & John H. Rogers & Jonathan H. Wright, 2000. "News and noise in G-7 GDP announcements," International Finance Discussion Papers 690, Board of Governors of the Federal Reserve System (U.S.).
  15. Cayen, Jean-Philippe & van Norden, Simon, 2005. "The reliability of Canadian output-gap estimates," The North American Journal of Economics and Finance, Elsevier, vol. 16(3), pages 373-393, December.
  16. John B. Taylor, 2001. "The Role of the Exchange Rate in Monetary-Policy Rules," American Economic Review, American Economic Association, vol. 91(2), pages 263-267, May.
  17. Carl E. Walsh, 2003. "Implications of a changing economic structure for the strategy of monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 297-348.
  18. Frank Smets, 1998. "Output gap uncertainty: does it matter for the Taylor rule?," BIS Working Papers 60, Bank for International Settlements.
  19. Carl E. Walsh, 2003. "Minding the speed limit," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue may30.
  20. Stark, Tom & Croushore, Dean, 2002. "Reply to the comments on 'Forecasting with a real-time data set for macroeconomists'," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 563-567, December.
  21. Orphanides, Athanasios, 2003. "Monetary policy evaluation with noisy information," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 605-631, April.
  22. Kuttner, Kenneth N, 1994. "Estimating Potential Output as a Latent Variable," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 361-68, July.
  23. Athanasios Orphanides, 2001. "Monetary Policy Rules Based on Real-Time Data," American Economic Review, American Economic Association, vol. 91(4), pages 964-985, September.
  24. Dean Croushore & Tom Stark, 1999. "A real-time data set for macroeconomists," Working Papers 99-4, Federal Reserve Bank of Philadelphia.
  25. N. Gregory Mankiw & Matthew D. Shapiro, 1986. "News or Noise? An Analysis of GNP Revisions," NBER Working Papers 1939, National Bureau of Economic Research, Inc.
  26. Malcolm D. Knight & Chair, 2003. "Implications of a changing economic structure for the strategy of monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 361-371.
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