Bayesian analysis of output gap in Barbados
Temisan Agbeyegbe ()
Latin American Journal of Central Banking (previously Monetaria), 2020, vol. 1, issue 1
This article contributes to understanding the performance of various unobserved components (UC) models in fitting Barbados’ real GDP. Relying on recent UC models techniques, it finds support for the UC model that captures correlated disturbances, but not for the model that does not. The best model is the correlated UC model with two breaks: 1981 and 2008. Estimates show that the trend and cycle innovations are positively correlated. There is evidence suggesting that trend output growth has slowdown in the past decade. The Bayes factor result indicates that the GDP trend is better modeled as a stochastic process rather than a deterministic one.
Keywords: Output gap; Unobserved Component; Trend; Caribbean (search for similar items in EconPapers)
JEL-codes: C11 C15 C22 E31 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:lajcba:v:1:y:2020:i:1:s266614382030020x
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Latin American Journal of Central Banking (previously Monetaria) is currently edited by Manuel Ramos-Francia
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