Closer to Finding Yeti

Tomáš Mičko, Alexander Karsay (), Zuzana Mucka () and Lucia Sramkova ()
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Alexander Karsay: Council for Budget Responsibility
Zuzana Mucka: Council for Budget Responsibility
Lucia Sramkova: Council for Budget Responsibility

Working Papers from Council for Budget Responsibility

Abstract: This paper offers a synthesis of several approaches to measuring output gap in Slovakia and serves as an update of the original CBR work Finding Yeti after almost a decade. A “suite of models” approach is estimated and assessed to provide advantages over single models. Following the recommendation of the EU IFIs guide suggesting no one-size-fits-all approach for measuring output gap, our family of methods consist of two unobserved component models, principal component model, semi-structural model and Modified Hamilton filter. We propose a novelty approach to weighting the individual models capturing recent structural innovations in the economy to construct one central estimate of the output gap. Such a robust estimate is maximising its overall plausibility and applicability to prudent fiscal policy assessment.

Keywords: output gap; unobserved component; trend; cycle; plausibility; Bayesian analysis; estimation (search for similar items in EconPapers)
JEL-codes: C11 C13 C32 E32 E62 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2023-08
New Economics Papers: this item is included in nep-ecm and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:cbe:wpaper:202301

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