Norges Bank Output Gap Estimates: Forecasting Properties, Reliability and Cyclical Sensitivity
Francesco Furlanetto (),
Frank Hansen and
No 2020/7, Working Paper from Norges Bank
This paper documents the suite of models used by Norges Bank to estimate the output gap. The models are estimated using data on GDP, unemployment, inflation, wages, investment, house prices and credit. We evaluate the estimated output gap series in terms of its forecasting properties, its reliability and its cyclical sensitivity to various measures of demand and supply shocks. A simple un-weighted average of the models features a better forecasting performance than each individual model. In addition, it helps predicting inflation in pseudo real-time and exhibits limited variations when new data become available. The summary measure of potential output responds strongly and rapidly to permanent shocks and to narrative measures of technology shocks but, although to a more limited extent, also to transitory shocks.
Keywords: Output Gap; Forecasting Inflation; Cyclical Sensitivity; Output Gap Revisions (search for similar items in EconPapers)
JEL-codes: C38 E17 E32 (search for similar items in EconPapers)
Pages: 26 pages
New Economics Papers: this item is included in nep-eec, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2020_07
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