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What Is in Your Output Gap? Unified Framework & Decomposition into Observables
Author:
Michal Andrlenull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2013: Issue 105
Language:
English
Publication Date:
10 May 2013
DOI:
https://doi.org/10.5089/9781484399552.001
ISBN:
9781484399552
ISSN:
1018-5941
Pages:
45
Keywords:
WP; least squares; output gap; linear filters; observable decomposition; DSGE; output gap estimate; B. output gap estimation; output gap estimation method; backward-looking output gap equation; output gap estimator; inflation expectation; output gap estimation approach; Potential output; Inflation; Capacity utilization; Estimation techniques
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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.
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This paper discusses several popular methods to estimate the ‘output gap’. It provides a unified, natural concept for the analysis, and demonstrates how to decompose the output gap into contributions of observed data on output, inflation, unemployment, and other variables. A simple bar-chart of contributing factors, in the case of multi-variable methods, sharpens the intuition behind the estimates and ultimately shows ‘what is in your output gap.’ The paper demonstrates how to interpret effects of data revisions and new data releases for output gap estimates (news effects) and how to obtain more insight into real-time properties of estimators.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2013: Issue 105