EconPapers    
Economics at your fingertips  
 

Estimating the Output, Inflation and Unemployment Gaps in Ireland using Bayesian Model Averaging

Michael O’Grady
Additional contact information
Michael O’Grady: Central Bank of Ireland

The Economic and Social Review, 2019, vol. 50, issue 1, 35-76

Abstract: We aim to overcome the issue of model selection in output, wage inflation and unemployment gap estimation for Ireland, using Bayesian model averaging. Employing a stochastic model specification search with time-varying parameters approach, we draw from a number of standard model specifications, based on variable selection, trend output identification and distributional assumptions. From the resulting model averaging with Irish data, we find that the unemployment gap is a strong predictor of the output gap, but conditional on the unemployment gap, the output gap has limited influence on the wage inflation gap. Additionally, we observe a decline in potential output growth from the early 2000s, although growth rates have increased strongly since Q1 2012. Finally we find that shocks to output growth and wage inflation are better characterised by Student’s t-distributions, rather than conventional Gaussian distributions, suggesting that extreme events occur with a more relative frequency that is typically assumed.

Keywords: output gap; inflation gap; unemployment gap; Ireland (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.esr.ie/article/view/1118/211 (application/pdf)

Related works:
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:eso:journl:v:50:y:2019:i:1:p:35-76

Access Statistics for this article

More articles in The Economic and Social Review from Economic and Social Studies
Bibliographic data for series maintained by Martina Lawless ().

 
Page updated 2021-01-15
Handle: RePEc:eso:journl:v:50:y:2019:i:1:p:35-76