Estimating the U.S. output gap with state‐level data

Manuel González‐Astudillo
Authors registered in the RePEc Author Service: Manuel González-Astudillo

Journal of Applied Econometrics, 2019, vol. 34, issue 5, 795-810

Abstract: This paper develops a method to estimate the U.S. output gap by exploiting the cross‐sectional variation of state‐level output and unemployment rate data. The model assumes that there are common output and unemployment rate trend and cycle components, and that each state's output and unemployment rate are subject to idiosyncratic trend and cycle perturbations. I estimate the model with Bayesian methods using quarterly data from 2005:Q1 to 2018:Q2 for the 50 states and the District of Columbia. Results show that the U.S. output gap reached about negative 4.6% around the years of the Great Recession and was about 0.9% in 2018:Q2.

Date: 2019
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