The information content of real-time output gap estimates, an application to the euro area

Gerhard Rünstler ()

No 182, Working Paper Series from European Central Bank

Abstract: The paper investigates real-time output gap estimates for the euro artea obtained from various unobserved components (UOC) models. Based on a state space modelling framework, three criteria are used to evaluate real-time estimates, I.e. standard errors, unbiasedness and conditional inflation forecasts. Real time estimates from univariate moving average filters and from bivariate UOC models based on output and inflation are found to be rather uninformative. Extended models, which employ the information from cyclical indicators and factor inputs, however, improve substantially upon the former models in all criteria. The pessimism on the reliability of real-time output gap estimates expressed in earlier literature may therefore be overstated. JEL Classification: C52, E31, E32

Keywords: filtering and information; inflation dynamics; output gap; UOC models (search for similar items in EconPapers)
Date: 2002-09
Note: 339116
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Citations: View citations in EconPapers (60)

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