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Hindsight vs. Real time measurement of the output gap: Implications for the Phillips curve in the Chilean Case

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  • Camila Figueroa
  • Jorge Fornero
  • Pablo García

Abstract

We examine sources of output gap revisions in Chile and document how the informational content of these measures affects forecasts of inflation using estimated Phillips curves. Data and forecasts come from Monetary Policy Reports. Output gap revisions are found well behaved because cannot be predicted. We consider backward and forward-looking specifications and also real time, quasi-real time and final output gap estimates. Median and common-factor inflation present lower forecast errors. Results suggest that the passage of time is informative to measure output gap. Inflation forecasts more accurate are found using forward-looking specifications and CB of Chile Staff’s gap estimates.

Suggested Citation

  • Camila Figueroa & Jorge Fornero & Pablo García, 2019. "Hindsight vs. Real time measurement of the output gap: Implications for the Phillips curve in the Chilean Case," Working Papers Central Bank of Chile 854, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:854
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    1. Carlomagno, Guillermo & Fornero, Jorge & Sansone, Andrés, 2023. "A proposal for constructing and evaluating core inflation measures," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 4(3).

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