Monitoring the Economy in Real Time: Trends and Gaps in Real Activity and Prices

Thomas Hasenzagl, Filippo Pellegrino, Lucrezia Reichlin and Giovanni Ricco ()
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Thomas Hasenzagl: University of Minnesota and Federal Reserve Bank of Minneapolis
Filippo Pellegrino: Imperial College London

No 2023-06, Working Papers from Center for Research in Economics and Statistics

Abstract: We propose two specifications of a real-time mixed-frequency semi-structural time series model for evaluating the output potential, output gap, Phillips curve, and Okun’s law for the US. The baseline model uses minimal theory-based multivariate identification restrictions to inform trend-cycle decomposition, while the alternative model adds the CBO’s output gap measure as an observed variable. The latter model results in a smoother output potential and lower cyclical correlation between inflation and real variables but performs worse in forecasting beyond the short term. This methodology allows for the assessment and real-time monitoring of official trend and gap estimates.

Keywords: real-time forecasting; output gap; Phillips curve; semi-structural models; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: C11 C32 C53 E31 E32 E52 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2022-03-27
New Economics Papers: this item is included in nep-ets and nep-mac
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Related works:
Working Paper: Monitoring the Economy in Real Time: Trends and Gaps in Real Activity and Prices (2023)
Working Paper: Monitoring the Economy in Real Time: Trends and Gaps in Real Activity and Prices (2022)
Working Paper: Monitoring the Economy in Real Time: Trends and Gaps in Real Activity and Prices (2022)
Working Paper: Monitoring the Economy in Real Time: Trends and Gaps in Real Activity and Prices (2022)
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