Bayesian Analysis of the Output Gap

Planas, Christophe; Rossi, Alessandro; Fiorentini, Gabriele

doi:10.1198/073500106000000576

Cited by 33 publications

(51 citation statements)

References 32 publications

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“…The prior is

(τ - 2) / (141 - 2) \sim B e t a (2.96, 10.70)

and

a \sim B e t a (5.82, 2.45)

, see Planas, Rossi, and Fiorentini (), p.23.…”

mentioning

confidence: 99%

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An Inflation‐Predicting Measure of the Output Gap in the Euro Area

Jarociński¹,

Lenza²

2018

J of Money Credit Banking

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Using a small Bayesian dynamic factor model of the euro area, we estimate the deviations of output from its trend that are consistent with the behavior of inflation. We label these deviations the output gap. In order to pin down the features of the model, we evaluate the accuracy of real‐time inflation forecasts from different model specifications. The version that forecasts inflation best implies that after the 2011 sovereign debt crisis, the output gap in the euro area has been much larger than the official estimates. Versions featuring a secular stagnation‐like slowdown in trend growth, and hence a small output gap after 2011, do not adequately capture the inflation developments.

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“…The prior is

(τ - 2) / (141 - 2) \sim B e t a (2.96, 10.70)

and

a \sim B e t a (5.82, 2.45)

, see Planas, Rossi, and Fiorentini (), p.23.…”

mentioning

confidence: 99%

“…The small-scale Phillips curve model of Kuttner (1994) initiated this literature. Planas, Rossi, and Fiorentini (2008) estimate a Bayesian version of Kuttner's model and we build on their priors. Similar to Baştürk et al (2014), we use nonfiltered data and pay much attention to modeling their low-frequency behavior.…”

mentioning

confidence: 99%

An Inflation‐Predicting Measure of the Output Gap in the Euro Area

Jarociński¹,

Lenza²

2018

J of Money Credit Banking

View full text Add to dashboard Cite

show abstract

“…Therefore, we use importance sampling (see Appendix A.2 for technical details). As noted by Planas et al (2008), Bayesian estimation of unobserved component models avoids the pile-up problem by specifying prior distributions that are strictly positive for the variance parameters. Another important advantage of the Bayesian framework over standard ML is that it is straightforward to calculate the posterior densities of both the parameter vector j and the smoothed state vectorâ t 14 See e.g.…”

Section: Parameter Estimation: a Bayesian Frameworkmentioning

confidence: 99%

Taylor rules and the Canadian–US equilibrium exchange rate

Berger

Kempa

2012

Journal of International Money and Finance

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“…The first attempt to estimate the European Monetary Union output gap with Bayesian methods was done by Planas, Rossi and Fiorentini (2008), who use a UC model with real GDP and the inflation rate as observable variables. The results show that the modal period of the cycle is about nine years.…”

Section: Estimation Of the Output Gap In The Euro Areamentioning

confidence: 99%

An Output Gap Measure for the Euro Area: Exploiting Country-Level and Cross-Sectional Data Heterogeneity

González‐Astudillo

2018

FEDS

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This paper proposes a methodology to estimate the euro-area output gap by taking advantage of two types of data heterogeneity. On the one hand, the method uses information on real GDP, inflation, and the unemployment rate for each member state; on the other hand, it jointly considers this information for all the euro-area countries to extract an area-wide output gap measure. The setup is an unobserved components model that theorizes a common cycle across euro-area economies in addition to countryspecific cyclical components. I estimate the model with Bayesian methods using data for the 19 countries of the euro area from 2000:Q1 through 2017:Q2 and perform model comparisons across different specifications of the output trend. The estimation of the model preferred by the data indicates that, because of negative shocks to trend output during the global financial crisis, output remained slightly above potential in that period, but an output gap of about negative 3 1 ⁄2 percent emerged during the European debt crisis. At the end of the sample period, output is estimated to be about 1 percent above potential.

show abstract

Bayesian Analysis of the Output Gap

Cited by 33 publications

References 32 publications

An Inflation‐Predicting Measure of the Output Gap in the Euro Area

An Inflation‐Predicting Measure of the Output Gap in the Euro Area

Taylor rules and the Canadian–US equilibrium exchange rate

An Output Gap Measure for the Euro Area: Exploiting Country-Level and Cross-Sectional Data Heterogeneity

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