Output gaps, inflation and financial cycles in the UK

Melolinna, Marko; Tóth, Máté

doi:10.1007/s00181-018-1498-4

Cited by 12 publications

(11 citation statements)

References 27 publications

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“…Albert et al (2015) employ a similar method in their assessment of potential output in China: the capital stock input to the production function is adjusted for the credit cycle to account for possible overinvestment. Blagrave et al (2013), Melolinna and Tóth (2016) and Tóth (2015), in addition to relying on a relationship akin to equation (3), also include a Phillips curve and an Okun law.…”

mentioning

confidence: 99%

Fiscal Sustainability and the Financial Cycle

Borio

Lombardi

Zampolli

2017

Rethinking Fiscal Policy After the Crisis

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BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).

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confidence: 99%

Fiscal Sustainability and the Financial Cycle

Borio

Lombardi

Zampolli

2017

Rethinking Fiscal Policy After the Crisis

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“…Figure 3 shows that for almost all models and countries, the revision is higher at both the 1-year and the 3-year horizon with financial variables than in the baseline specification (the arrows are almost always above the 45-degree lines). 14 This seems to contradict some of the previous results, in particular the conclusion of Borio et al (2017), Grintzalis et al (2017) and Melolinna and Tóth (2019). The reason for the discrepancy of the results is twofold.…”

Section: Real Time Performancementioning

confidence: 89%

“…Other papers extend the previous approach by incorporating financial information into semi-structural UCMs (see e.g. Rünstler and Vlekke (2018); Melolinna and Tóth (2019)). Our baseline semi-structural model is mostly based on Melolinna and Tóth (2019).…”

Section: Output Gap Estimates -Francementioning

confidence: 99%

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Semi-Structural VAR and Unobserved Components Models to Estimate Finance-Neutral Output Gap

2020

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The paper assesses the impact of adding information on financial cycles on the output gap estimates for eight advanced economies using two unobserved components models: a reduced form extended Hodrick-Prescott filter, and a standard semi-structural unobserved components model. To complement these models, a semi-structural vector autoregression model is proposed in which only supply shocks are identified. The accuracy of the output gap estimates is assessed based on their performance in predicting recessions. The models with financial variables generally produce more accurate output gap estimates at the expense of increased real-time volatility. While the extended Hodrick-Prescott filter is particularly appealing for its real-time stability, it lags behind the two semi-structural models in terms of forecasting performance. The vector autoregression model augmented with financial variables features the best in-sample forecasting performance, and it has similar real-time prediction capabilities to the semi-structural unobserved components model. Overall, financial cycles appear to be relevant in Japan, Spain, the UK, and -to a lesser extent -in the US and in France, while they are relatively muted in Canada, Germany, and Italy.

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“…Evans ( 2018 ), Melolinna et al. ( 2019 )) and it is calibrated around 0.5 as the Okun’s law suggests. It is sometimes used then for cross-country comparisons, although the other variable in the dynamic equation, i.e.…”

Section: Problem Statementmentioning

confidence: 99%

Estimation of the potential GDP by a new robust filter method

Gyurkovics

Takács

2023

Cent Eur J Oper Res

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The first purpose of this paper is to propose a theoretically new robust filter method to estimate non-observable macroeconomic indicators. The second purpose is to apply the proposed method to estimate the Hungarian potential GDP in 2000–2021. The novelty of the proposed filter method is that — unlike papers published so far — it does not require the stability of the dynamic model, only a partial stability condition must be satisfied. Moreover, such time-dependent uncertainties and nonlinearities can arise in the model that satisfy a general quadratic constraint. An important advantage of the proposed robust filter method over the traditional Kalman filter is that no stochastic assumptions is needed that may not be valid for the problem at hand. The proposed filter method has never been applied to estimate the potential GDP. To estimate the Hungarian potential GDP, the proposed method is applied using uni-, bi- and trivariate models. Estimations up to 2021 has not been published yet for the Hungarian economy. The examined period includes both the financial world crisis and the Covid-19 crisis. The results of the different models are consistent. It turned out that the economic policy was very procyclical after 2012, and the GDP gap was still positive during and also after the Covid-19 crisis.

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Output gaps, inflation and financial cycles in the UK

Cited by 12 publications

References 27 publications

Fiscal Sustainability and the Financial Cycle

Fiscal Sustainability and the Financial Cycle

Semi-Structural VAR and Unobserved Components Models to Estimate Finance-Neutral Output Gap

Estimation of the potential GDP by a new robust filter method

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