Structural Estimation of the Output Gap: A Bayesian DSGE Approach for the U.S. Economy

Yasuo Hirose and Saori Naganuma
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Saori Naganuma: Bank of Japan

No 07-E-24, Bank of Japan Working Paper Series from Bank of Japan

Abstract: We estimate the output gap that is consistent with a fully specified DSGE model. Given the structural parameters estimated using Bayesian methods, we estimate the output gap that is defined as a deviation of output from its flexible-price equilibrium. Our output gap illustrates the U.S. business cycles well, compared with other estimates. We find that the main source of the output gap movements is the demand shocks, but that the productivity shocks contributed to the stable output gap in the late 1990s. The robustness analysis shows that the estimated output gap is sensitive to the specification for monetary policy rules.

Keywords: Output Gap; DSGE Models; Bayesian Estimation (search for similar items in EconPapers)
JEL-codes: C11 C32 E31 E32 (search for similar items in EconPapers)
Date: 2007-11
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Citations: View citations in EconPapers (3)

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