{
  "title": "Output Gap Uncertainty and Real-Time Monetary Policy",
  "publication": "IMF Working Papers, January 23, 2015",
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  "summary": "Output gap estimates are subject to a wide range of uncertainty owing to data revisions and the difficulty in distinguishing between cycle and trend in real time. This is important given the central role in monetary policy of assessments of economic activity relative to capacity.",
  "authors": [
    "Francesco Grigoli",
    "Alexander Herman",
    "Andrew J Swiston",
    "Gabriel Di Bella"
  ],
  "publishDate": "2015-01-23",
  "series": "IMF Working Papers",
  "sections": [
    {
      "heading": "Core findings on output gap uncertainty",
      "content": "- Output gap estimates are subject to a wide range of uncertainty owing to data revisions and the difficulty in distinguishing between cycle and trend in real time.\n- Country desks tend to overestimate economic slack, especially during recessions.\n- Uncertainty in initial output gap estimates persists several years.\n- Only a small share of output gap revisions is predictable ex ante based on characteristics like output dynamics, data quality, and policy frameworks."
    },
    {
      "heading": "Implications for monetary policy and inflation targeting",
      "content": "- Assessments of economic activity relative to capacity are central to monetary policy; large uncertainty in output gap estimates therefore has important policy implications.\n- For a group of Latin American inflation targeters, prescriptions from typical monetary policy rules are subject to large changes due to output gap revisions.\n- Output gap revisions explain a sizable proportion of the deviation of inflation from target, suggesting this information is not accounted for in real-time policy decisions."
    },
    {
      "heading": "Methodological and empirical notes (as presented)",
      "content": "- The analysis highlights the roles of data revisions and the challenge of distinguishing cycle from trend in real time.\n- Predictability tests find only a small share of revisions can be anticipated using observable characteristics such as output dynamics, data quality, and policy frameworks.\n\n---\n\n Content in this bundle\n\n- PDP-Working Paper\n  - PDP-Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - PDP-Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/output-gap-uncertainty-and-real-time-monetary-policy-42621"
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    "Authors: Francesco Grigoli, Alexander Herman, Andrew J Swiston, Gabriel Di Bella",
    "Published: January 23, 2015",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781498393454.001",
    "Output gap estimates are subject to a wide range of uncertainty owing to data revisions and the difficulty in distinguishing between cycle and trend in real time.",
    "Country desks tend to overestimate economic slack, especially during recessions.",
    "Uncertainty in initial output gap estimates persists several years.",
    "Only a small share of output gap revisions is predictable ex ante based on characteristics like output dynamics, data quality, and policy frameworks.",
    "Assessments of economic activity relative to capacity are central to monetary policy; large uncertainty in output gap estimates therefore has important policy implications.",
    "For a group of Latin American inflation targeters, prescriptions from typical monetary policy rules are subject to large changes due to output gap revisions.",
    "Output gap revisions explain a sizable proportion of the deviation of inflation from target, suggesting this information is not accounted for in real-time policy decisions.",
    "The analysis highlights the roles of data revisions and the challenge of distinguishing cycle from trend in real time.",
    "Predictability tests find only a small share of revisions can be anticipated using observable characteristics such as output dynamics, data quality, and policy frameworks.",
    "**PDP-Working Paper**"
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