Last edited by Nanris
Sunday, November 15, 2020 | History

4 edition of Output gap uncertainty found in the catalog.

Output gap uncertainty

Frank Smets

Output gap uncertainty

does it matter for the Taylor rule?

by Frank Smets

  • 78 Want to read
  • 28 Currently reading

Published by Bank for International Settlements, Monetary and Economic Dept. in Basle, Switzerland .
Written in English

    Places:
  • United States
    • Subjects:
    • Taylor"s rule.,
    • Gross domestic product -- United States -- Mathematical models.,
    • Monetary policy -- United States -- Mathematical models.

    • Edition Notes

      Statementby Frank Smets.
      SeriesBIS working papers,, no. 60, BIS working papers (Online) ;, no. 60.
      ContributionsBank for International Settlements. Monetary and Economic Dept.
      Classifications
      LC ClassificationsHG3879
      The Physical Object
      FormatElectronic resource
      ID Numbers
      Open LibraryOL3285849M
      LC Control Number2003616611


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Output gap uncertainty by Frank Smets Download PDF EPUB FB2

However, output gap estimates are very uncertain, even well after the fact. Output gap uncertainty increases around business cycle turning points. Lastly, Output gap uncertainty book macroeconomic uncertainty, as measured by the output gap's time-varying volatility, produces pronounced negative responses to other macroeconomic : Travis J.

Berge. Q1{Q4. These changes output gap uncertainty may have rst-order implications for the conduct of monetary policy. Orphanides () argues that policy ought to be less reactive to an estimated output gap in periods when it is especially uncertain, since Output gap uncertainty book interest rate movements are : Travis J.

Berge. Output gap estimates Output gap uncertainty book 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. Additional Physical Format: Online version: Smets, Frank. Output gap uncertainty. Basle: Bank for International Settlements, Monetary and Economic Dept., the output gap, conven tional wisdom has it that there is considerabl e uncertainty about contemporaneous gap me asurements.

F or example, Orphanides and van No rden (). Abstract. Using a novel dataset, I quantify the magnitude of the EU countries’ output gap revisions in –, and study the implications of this uncertainty for the optimal fiscal policy with a DSGE model. Get this from a library.

Output Gap Uncertainty and Real-Time Monetary Policy. [Francesco Grigoli; Alexander Herman; Andrew Swiston; Gabriel Di Bella] -- 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. Output gap uncertainty reduces the response to the current estimated output gap relative to current inflation and may partly explain why the parameters in estimated Taylor rules are often much less than what optimal control exercises which assume the state of the economy is known suggest.

Downloadable. We propose a methodology for producing density forecasts for the output gap in real time using a large number of vector autoregessions in inflation and output gap measures.

Density combination utilizes a linear mixture of experts framework to produce potentially non-Gaussian ensemble densities for the unobserved output gap.

In our application, we show that data revisions alter. notion that a global output gap influences domestic prices. Still, the global output gap may become increasingly impor-tant if the world’s economies continue to integrate.

Hard to measure Measuring the output gap is no easy task. Unlike actual out-put, the level of potential output and, hence, the output gap cannot be observed Size: KB. Smets () estimates the effect of output gap uncertainty on the monetary policy rule of the U.S.

economy, showing that output gap uncertainty reduces the response to the output gap. Similarly Author: Frank Smets.

The only uncertainty in this story was the size of the output gap. We could achieve, using fiscal policy, exactly the level of output we wanted in 2/3 years time. In reality we cannot, of course. However exactly the same principle operates if the uncertainty is about the output forecast rather than (or as well as) the output : Mainly Macro.

The Taylor rule sets the federal funds rate (FFR) using the following formula, where INF is the inflation rate and GAP is the output gap. FFR = 2 + INF + (INFminus− 2) + GAP If the Fed follows the Taylor rule and the economy goes into a recession, the Fed would.

Using quarterly data on output gaps and US economic policy uncertainty index, the study reports following empirical regularities: First, the dynamic regression results indicate that there is significant impact of immediate lag of output gap on stock market return, implying that output gap can help predict the stock market returns and hence it Cited by: 4.

mismeasurement of the output gap, I conclude that it is a relatively small culprit. The main cause of output gap revisions is due to the difficulty in estimating the level of potential output towards the end of the sample where statistical filter methods are generally unreliable.

Keywords: GDP, monetary policy, output gap, real-time data. Output Gap and Inflation Target. When the economy experiences downturn then there is a decline in the economy’s output of goods and service. But when the economy recovers then that output, popularly known as country’s GDP increases.

The output gap and employment gap are defined as the differences between the actual level for each variable and the baseline value. The actual level may be lower than the baseline level, and thus the output or employment gap can be negative.

The output and employment gap concepts can be useful to economists in several ways. First, output and. The output gap is normally expressed as a percentage of potential output. This conceptual framework for the relationship between the output gap and the deviation of inflation from target is based on the expectations-augmented Phillips Curve, originally developed 50 years ago by Milton Friedman.

Giannoni ( and ) shows policymakers averse to uncertainty will react more strongly to fluctuations in inflation and the output gap than if there were no uncertainty. They would put more weight on stabilizing inflation and the output gap and less weight on stabilizing the nominal interest : Loretta J.

This way of modeling data uncertainty is similar to that used by Orphanides () and Rudebusch () when analyzing the effects of output gap uncertainty.

12 These policy rules are not reaction functions in the strict sense, since they include the exchange rate variables (either directly or indirectly via CPI inflation), which are not Cited by: The gap between potential and actual output—the output gap—is a key variable for policymaking.

This paper adapts the methodology developed in Blagrave and others () to estimate the path of output gap in the U.S. economy. The results show that the output gap has considerably shrunk since the Great Recession, but still remains negative.

The idea of an output gap is conceptually sound – it is pretty clear that we can conceptualise some potential output level beyond which the productive system cannot squeeze any more real output without extra resource capacity being added (capital, labour, land, etc).

the output gap have considerably better real-time revision properties than those found by Orphanides and van Norden() andOrphanides() for an earlier set of output gap and Rudd() nd that revisions have become smaller since the mids, concluding that the output gap has been estimated more reliably in real timeCited by: 2.

We believe the output gap would widen further on the back of the protest action, keeping demand-side inflationary pressures sufficiently contained to justify lower rates. On the activity front, heightened uncertainty is already affecting business confidence, and.

Potential output is the hypothetical level of output that would be produced if all resources (like labour, capital and productivity) were employed at their long-term sustainable rate. In some blog posts published between (see here, here and here) I highlighted the major uncertainties in output-gap and structural-balance estimates.

This book determines whether BRICS GDP growth is a source of shocks or an amplifier of global growth shocks. The authors find that global economic growth and policy uncertainty reinforce each other via capital flows, credit conditions and business confidence on the domestic economy.

Gap width uncertainty. The steps of the gap width measurement are listed here below. The gap width definition has been given in Section and illustrated in Figure 3. The requirement of minimum distance between P g and P GDL is a part of the definition considered here.

The symbol w is used for the measurand. If satisfying the target Author: Carlo Ferri. Stanford neuroendocrinologist Robert Sapolsky’s recent book ‘Behave’ talks about the role of emotion in cognition – long story short is that it does actually serve a useful predictive purpose.

The book deserves it own reading, and judging by this review I suspect will be a useful complement to Surfing Uncertainty.

A Survey of Alternative Methodologies for Estimating Potential Output and the Output Gap. Journal of Macroeconomics, 21(3): – Journal of Macroeconomics, 21(3): Author: Karen Cabos, Hans-Jürgen Krupp.

The opening of the output gap is associated with a cumulative loss of income of around 6 per cent of annual GDP - illustrated in Figure 2b. This output will never be recovered since there is no offsetting positive output gap following the consolidation - i.e. the level of output returns to its steady-state growth path and remains there.

Yakov Ben-Haim(BH)presents another method for solving problems where the information base is(a) incomplete or(b) correctly categorizes these types of decision problems as "Decision under Severe Uncertainty".J M Keynes categorizes these two types of problems as(a) decision making under uncertainty in his General Theory(;GT)(or low weight of the evidence in the A Treatise on 4/5(2).

Estimating and Accounting for the Output Gap with Large Bayesian Vector Autoregressions, with James Morley, Journal of Applied Econometrics,vol(1), pg (lead article) [Data, Replication Files and Online Appendix] Global Factors and Trend Inflation, with Güneş Kamber, Journal of International Economics,vol(C), [Data, Replication Files and Online Appendix.

The output gap can play a central role in policymaking. For many central banks, including the US Federal Reserve, maintaining full employment is a policy goal.

Full employment corresponds to an output gap of zero. Nearly all central banks seek to keep inflation under control, and the output gap is a key determinant of inflation pressure. The impact of economic fluctuations on the total unemployment rate is widely studied, however, with respect to age- and gender-specific unemployment, this relationship is not so well examined.

We apply the gap version of Okun’s law, aiming to estimate youth unemployment rate sensitivity to output deviations from its potential level. Additionally, we aim to compare whether men or women Author: Mindaugas Butkus, Janina Seputiene. A genuine real-time data set is used, including vintages of several sets of euro area output gap estimates available from to 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 by: uncertainty foreshadow declines in investment, output, and employment in the United States and, in a panel VAR setting, for 12 major economies.

Extending our US index back toEPU rose dramatically in the s (from late ) and has drifted upwards since the s. JEL No. D80, E22, E66, G18, L The authors elaborate the roles in inflation of thresholds, nonlinearities and asymmetries introduced by economic conditions such as the size of exchange rate changes and volatility, GDP growth, inflation, output gap, credit growth, sovereign spreads and fiscal policy, providing new policy evidence on.

T he u.s. economy hit bottom in June Thirty months later, output growth remains sluggish and unemployment still hovers above 8 percent. A critical question is why.

One view attributes the weak recovery, at least in part, to high levels of uncertainty about economic policy.

A spark-gap transmitter is an obsolete type of radio transmitter which generates radio waves by means of an electric spark.

Spark-gap transmitters were the first type of radio transmitter, and were the main type used during the wireless telegraphy or "spark" era, the first three decades of radio, from to the end of World War 1.

German physicist Heinrich Hertz built the first experimental. Measuring uncertainty. Estimating the macroeconomic effects of financial and uncertainty shocks. The interaction of fiscal and monetary policy.

The determinants of systemic crises. Multi-layer factor models. MATLAB code associated with our new book Bayesian Econometric Methods (Second Edition) A new bivariate UC model for measuring long-run inflation expectations uncertainty using both monthly inflation and daily break-even inflation data.

Models for Output Gap.This computer code exploration process is the main purpose of the Sensitivity Analysis (SA) process. SA allows the study of how uncertainty in the output of a model can be apportioned to di erent sources of uncertainty in the model input [51]. It may be used to determine the input variables that contribute the most to an output behavior, and File Size: KB.However, estimates of real growth and also the output gap matter even when there is much uncertainty of this type.

Our results also suggest that estimates of the level of inflationary pressure and nominal GDP data become more important when the economy is prone to inflationary overreactions to shifts in technological progress.