Monitoring the Economy in Real Time: Trends and Gaps in Real Activity and Prices

A mixed-frequency semi-structural model is used for estimating unobservable quantities such as the output gap, the Phillips curve and the NAIRU in real time. We consider two specifications: in one the output gap is observed as the official CBO measure, in the other is unobserved and derived via mini...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Hasenzagl, Thomas, Pellegrino, Filippo, Reichlin, Lucrezia, Ricco, Giovanni
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2022
Subjects
Phillips curve
Real time
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Summary:A mixed-frequency semi-structural model is used for estimating unobservable quantities such as the output gap, the Phillips curve and the NAIRU in real time. We consider two specifications: in one the output gap is observed as the official CBO measure, in the other is unobserved and derived via minimal theory-based restrictions. We find that the CBO model implies a smoother trend output but the second model better captures the business cycle dynamics of nominal and real variables. The methodology offers both a framework for evaluating official estimates of unobserved quantities of economic interest and tracking them in real time.