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Improving real-time estimates of the output gap

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  • Thomas M. Trimbur

Abstract

This paper investigates strategies for real-time estimation of the output gap. First, I examine estimates from univariate models with stochastic cycles. This corresponds to the use of model-based band-pass filters in real-time, and I find that the turning points in real-time and final output gap series match more closely for higher order models and that the revisions properties and real-time accuracy are more favorable. Second, I investigate the use of capacity utilization as an auxiliary indicator to improve on output gap estimates in real-time. I find that this bivariate approach leads to significant gains in the accuracy of real-time estimates and in the quality of revisions.

Suggested Citation

  • Thomas M. Trimbur, 2009. "Improving real-time estimates of the output gap," Finance and Economics Discussion Series 2009-32, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2009-32
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    Cited by:

    1. Garratt, Anthony & Mitchell, James & Vahey, Shaun P., 2014. "Measuring output gap nowcast uncertainty," International Journal of Forecasting, Elsevier, vol. 30(2), pages 268-279.

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