Measuring Output Gap: Is It Worth Your Time?

Author/Editor:

Jiaqian Chen ; Lucyna Gornicka

Publication Date:

February 7, 2020

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

We apply a range of models to the U.K. data to obtain estimates of the output gap. A structural VAR with an appropriate identification strategy provides improved estimates of output gap with better real time properties and lower sensitivity to temporary shocks than the usual filtering techniques. It also produces smaller out-of-sample forecast errors for inflation. At the same time, however, our results suggest caution in basing policy decisions on output gap estimates.

Series:

Working Paper No. 20/24

English

Publication Date:

February 7, 2020

ISBN/ISSN:

9781513527864/1018-5941

Stock No:

WPIEA2020024

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

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