Real Time Estimation of Potential Output and Output Gap for the Euro-Area: Comparing Production Function with Unobserved Components and SVAR Approaches

Gian Luigi Mazzi, Frédéric Reynès (), Matthieu Lemoine and Paola Veroni ()
Additional contact information
Gian Luigi Mazzi: Eurostat
Paola Veroni: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

Working Papers from HAL

Abstract: We develop a new version of the production function (PF) approach usually used for estimating the output gap of the euro area. Our version does not call for any (often imprecise) measure of the capital stock and improves the estimation of the trend total factor productivity. We asses this approach by comparing it with two other multivariate methods mostly used for output gap estimates, a multivariate unobserved components (MUC) model and a Structural Vector Auto-Regressive (SVAR) model. The comparison is conducted by relying on assessment criteria such as the concordance of the turning points chronology with a reference one, the inflation forecasting power and the real-time consistency of the estimates. Two contributions are achieved. Firstly, we take into account data revisions and their impact on the output gap estimates by using vintage datasets coming from the Euro Area Business Cycle (EABCN) Real-Time Data-Base (RTDB). Secondly, the PF approach, generally employed by policy-makers despite of its difficult implementation, is assessed. We thus improve on previous papers which limited their assessment on other multivariate methods, e.g. MUC or SVAR models. The different methods show different ranks in relation to the three criteria. This new PF estimate appears highly concordant with the reference chronology. Its forecasting power appears favourable only for the shortest horizon (1 month). Finally, the SVAR model appears more consistent in real-time.

Keywords: potential output; production function; state-space models; structural VARS (search for similar items in EconPapers)
Date: 2008-11
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-01027422
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://sciencespo.hal.science/hal-01027422/document (application/pdf)

Related works:
Working Paper: Real time estimation of potential output and output gap for the euro-area: comparing production function with unobserved components and SVAR approaches (2008)
Working Paper: Real Time Estimation of Potential Output and Output Gap for the Euro-Area: Comparing Production Function with Unobserved Components and SVAR Approaches (2008)
Working Paper: Real time estimation of potential output and output gap for theeuro-area: comparing production function with unobserved componentsand SVAR approaches (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-01027422

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().