Real-Time Representations of the Output Gap

Anthony Garratt (), Kevin Lee (), Emi Mise and Kalvinder Shields
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Emi Mise: University of Leicester, UK
Kalvinder Shields: University of Melbourne, Australia

The Review of Economics and Statistics, 2008, vol. 90, issue 4, pages 792-804

Abstract: Methods are described for the appropriate use of data obtained and analysed in real time to represent the output gap. The methods employ cointegrating VAR techniques to model real-time measures and realizations of output series jointly. The model is used to mitigate the impact of data revisions; to generate appropriate forecasts that can deliver economically meaningful output trends and that can take into account the end-of-sample problems encountered in measuring these trends; and to calculate probability forecasts that convey in a clear way the uncertainties associated with the gap measures. The methods are applied to data for the United States 1965q4-2004q4, and the improvements over standard methods are illustrated. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2008
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Related works:
Working Paper: Real Time Representations of the Output Gap (2006)
Working Paper: Real time Representations of the Output Gap (2005)
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