System estimates of potential output and the NAIRU

Apel, Mikael; Jansson, Per

doi:10.1007/s001810050061

Cited by 67 publications

(39 citation statements)

References 36 publications

(29 reference statements)

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“…The estimated variance of the cyclical shock is larger than that of the natural rate shocks. This is in line with the results in Lindblad (1997) but contrary to the results in Apel and Jansson (1999). Models 3 and 4 suggest that the estimates in the unemployment equation could be unstable across the subperiods.…”

Section: Resultssupporting

confidence: 87%

The Equilibrium Rate of Unemployment and the Real Exchange Rate: An Unobserved Components System Approach

Lindblad

Sellin

2008

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe set up and estimate a structural unobserved components open economy model for the rate of unemployment and the real exchange rate in Sweden. This approach enables us to simultaneously determine changes in both cyclical and equilibrium rates. Our results show that the Natural Rate/NAIRU has increased by approximately 1.5 percentage points since the 1970s, driven by a depreciation of the equilibrium exchange rate, changes in taxes, active labor market policies and demographic factors. Thus, the results indicate that the dramatic changes in the Swedish unemployment rate during the 1990s mainly was a cyclical phenomenon. After five devaluations in the 1970s and early 1980s the krona was allowed to float on 19 November 1992. The depreciating trend continued during the floating rate period. Our model successfully explains this development as being driven by changes in terms of trade, demographics and structural government deficits. The change in the rate of inflation is found to be quite sensitive to the unemployment gap. An increase in cyclical unemployment by 1 percentage point will reduce inflation by approximately 0.6 percentage points within a year.

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Section: Resultssupporting

confidence: 87%

The Equilibrium Rate of Unemployment and the Real Exchange Rate: An Unobserved Components System Approach

Lindblad

Sellin

2008

SSRN Journal

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“…9 This builds on the empirical regularity of the strong correlation between output growth and unemployment growth and unemployment reported by Okun (1962). 10 For example Apel and Jansson (1999). 8 where (9) is an identity which simply states that the growth rate of output is equal to the growth in potential output plus the change in the output gap.…”

Section: Multivariate Unobserved Component-methods (Mvuc)mentioning

confidence: 99%

Forecasting inflation with an uncertain output gap

Bjørnland

Brubakk²,

Jore³

2007

Empir Econ

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe output gap (measuring the deviation of output from its potential) is a crucial concept in the monetary policy framework, indicating demand pressure that generates inflation. The output gap is also an important variable in itself, as a measure of economic fluctuations. However, its definition and estimation raise a number of theoretical and empirical questions. This paper evaluates a series of univariate and multivariate methods for extracting the output gap, and compares their value added in predicting inflation. The multivariate measures of the output gap have by far the best predictive power. This is in particular interesting, as they use information from data that are not revised in real time. We therefore compare the predictive power of alternative indicators that are less revised in real time, such as the unemployment rate and other business cycle indicators. Some of the alternative indicators do as well, or better, than the multivariate output gaps in predicting inflation. As uncertainties are particularly pronounced at the end of the calculation periods, assessment of pressures in the economy based on the uncertain output gap could benefit from being supplemented with alternative indicators that are less revised in real time.

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“…Figure 4 displays the default rates over time among companies in the rating classes for three different horizons: 1, 4 and 8 quarters ahead. 7 The general picture that is brought forward by these graphs is that default …”

Section: Bank Datamentioning

confidence: 99%

Capital Charges under Basel II: Corporate Credit Risk Modelling and the Macroeconomy

et al. 2002

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe Internal Ratings Based (IRB) approach for capital determination is one of the cornerstones in the proposed revision of the Basel Committee rules for bank regulation. We evaluate the IRB approach using historical business loan portfolio data from a major Swedish bank for the period 1994 to 2000. First, we estimate a duration model that takes into account both company, loan related and macroeconomic variables. Next, we obtain a Value-at-Risktype (VaR) credit risk measure, by model-based simulations. Moreover, we study how both the bank's credit risk and buffer capital changes over time (had the bank been subject to the proposed rules). This approach allows us to (i) make individual forecasts of default risk conditional on company, loan and macro variables, (ii) study portfolio credit risk over time, (iii) assess to what extent the new Accord will achieve its main objective of increasing credit risk sensitivity in minimal capital charges, and (iv) compare current capital requirements to those under the proposed system. Our results show that macro conditions have great explanatory power in predicting default risk and calculating credit risk. The IRB approach, although sensitive to the choice of some horizon parameters, is an achievement in the intended direction.

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System estimates of potential output and the NAIRU

Cited by 67 publications

References 36 publications

The Equilibrium Rate of Unemployment and the Real Exchange Rate: An Unobserved Components System Approach

The Equilibrium Rate of Unemployment and the Real Exchange Rate: An Unobserved Components System Approach

Forecasting inflation with an uncertain output gap

Capital Charges under Basel II: Corporate Credit Risk Modelling and the Macroeconomy

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