The Reliability of Real Time Estimates of the Euro Area Output Gap

Massimiliano Marcellino and Alberto Musso

No 7716, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper provides evidence on the reliability of euro area real-time output gap estimates, including those provided by the IMF, OECD and EC and a set of model based measures. A genuine real-time data set is used, including vintages of several sets of euro area output gap estimates available from 1999 to 2006. It turns out that real-time estimates of the output gap are characterised by a high degree of uncertainty, much higher than that resulting from model and estimation uncertainty only. In particular, the evidence indicates that both the magnitude and the sign of the real-time estimates of the euro area output gap are very uncertain. The uncertainty is mostly due to parameter instability, while data revisions seem to play a minor role. To benchmark our results, we repeat the analysis for the US over the same sample. It turns out that US real time estimates are much more correlated with final estimates than for the euro area, data revisions play a larger role, but overall the unreliability in real time of the US output gap measures detected in earlier studies is confirmed in the more recent period.

Keywords: Data revisions; Euro area; Output gap; Real-time data (search for similar items in EconPapers)
JEL-codes: E31 E37 E52 E58 (search for similar items in EconPapers)
Date: 2010-02
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Citations: View citations in EconPapers (18)

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Related works:
Journal Article: The reliability of real-time estimates of the euro area output gap (2011)
Working Paper: the Reliability of Real Time Estimates of the EURO Area Output Gap (2010)
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