Theoretical and Practical Approaches for Determining Trend Output: an Application to Chile

Francisco A. Gallego () and Christian Johnson ()

Journal Economía Chilena (The Chilean Economy), 2001, vol. 4, issue 2, pages 27-58

Abstract: This article presents alternative output trend theories and discusses different estimations for Chile’s GDP, using quarterly data from 1986 to 2001. Among methods considered are the Hodrick-Prescott filter, Quadratic and Gaussian kernels, the wavelets filter, and structural vector autoregressive models (SVAR). Output trend estimates are very sensitive to idiosyncratic assumptions. However, the Hodrick-Prescott filter and SVAR models look more accurate for generating output gaps related to variables such as inflation. We also present confidence intervals for these two methodologies.

Date: 2001

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Journal Economía Chilena (The Chilean Economy) is edited by Klaus Schmidt-Hebbel

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