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The output gap and inflation in U.S. data: an empirical note

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  • Anindya Biswas

    (Spring Hill College)

Abstract

This paper analyzes the relationship between the output gap and inflation. This study uses a newly proposed flexible data-driven measure of the output gap and finds that such a distance weight-based measure of the ex-ante output gap (WAgap), has a significant and better in-sample relation with inflation in U.S from January, 1948 to August, 2013 compared to a prevalent ex-ante trend-based measure of the output gap. However, this study confirms the literature's conclusion that finding the out-of-sample/real-time predictability for inflation is most challenging, and the WAgap model provides only modest improvement over the benchmark historical mean model.

Suggested Citation

  • Anindya Biswas, 2015. "The output gap and inflation in U.S. data: an empirical note," Economics Bulletin, AccessEcon, vol. 35(2), pages 841-845.
    • Handle: RePEc:ebl:ecbull:eb-14-00475
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Inflation predictability; Output gap; Real-time data; Beta-weighting scheme;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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