Real-time output gaps in the estimation of Taylor rules: a red herring?
Real-time, quasi-real, 'nearly real' and full sample output gaps for the UK, generated by linear and quadratic, Hodrick-Prescott filter and unobserved components (UC-ARIMA) techniques, are presented and analysed. Particular attention is paid to the behaviour of the different series during...
| Main Authors: | , |
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| Format: | Working paper |
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University of Oxford
2004
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| _version_ | 1797100672854786048 |
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| author | Adam, C Cobham, D |
| author_facet | Adam, C Cobham, D |
| author_sort | Adam, C |
| collection | OXFORD |
| description | Real-time, quasi-real, 'nearly real' and full sample output gaps for the UK, generated by linear and quadratic, Hodrick-Prescott filter and unobserved components (UC-ARIMA) techniques, are presented and analysed. Particular attention is paid to the behaviour of the different series during the large fluctuations of the late 1980s and early 1990s, and the implied underlying trends of potential output are identified. In that period the rolling-time estimation of the real time and quasi-real gaps involves systematic distortion. After 1994, by contrast, the various measures are closer together, and the choice between them is less important. None of these measures corresponds precisely to what researchers would like - the output gap as understood at the time by policymakers - which it seems nearly impossible to identify with (non-spurious) precision but, given the nature and purpose of Taylor rule estimations, imperfect measures are acceptable. For periods with large swings researchers should settle for the nearly real series, while for more stable periods the choice of measure makes little difference. |
| first_indexed | 2024-03-07T05:40:55Z |
| format | Working paper |
| id | oxford-uuid:e5879f6c-449b-4283-88d4-bad159b52ed5 |
| institution | University of Oxford |
| last_indexed | 2024-03-07T05:40:55Z |
| publishDate | 2004 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:e5879f6c-449b-4283-88d4-bad159b52ed52022-03-27T10:24:41ZReal-time output gaps in the estimation of Taylor rules: a red herring?Working paperhttp://purl.org/coar/resource_type/c_8042uuid:e5879f6c-449b-4283-88d4-bad159b52ed5Bulk import via SwordSymplectic ElementsUniversity of Oxford2004Adam, CCobham, DReal-time, quasi-real, 'nearly real' and full sample output gaps for the UK, generated by linear and quadratic, Hodrick-Prescott filter and unobserved components (UC-ARIMA) techniques, are presented and analysed. Particular attention is paid to the behaviour of the different series during the large fluctuations of the late 1980s and early 1990s, and the implied underlying trends of potential output are identified. In that period the rolling-time estimation of the real time and quasi-real gaps involves systematic distortion. After 1994, by contrast, the various measures are closer together, and the choice between them is less important. None of these measures corresponds precisely to what researchers would like - the output gap as understood at the time by policymakers - which it seems nearly impossible to identify with (non-spurious) precision but, given the nature and purpose of Taylor rule estimations, imperfect measures are acceptable. For periods with large swings researchers should settle for the nearly real series, while for more stable periods the choice of measure makes little difference. |
| spellingShingle | Adam, C Cobham, D Real-time output gaps in the estimation of Taylor rules: a red herring? |
| title | Real-time output gaps in the estimation of Taylor rules: a red herring? |
| title_full | Real-time output gaps in the estimation of Taylor rules: a red herring? |
| title_fullStr | Real-time output gaps in the estimation of Taylor rules: a red herring? |
| title_full_unstemmed | Real-time output gaps in the estimation of Taylor rules: a red herring? |
| title_short | Real-time output gaps in the estimation of Taylor rules: a red herring? |
| title_sort | real time output gaps in the estimation of taylor rules a red herring |
| work_keys_str_mv | AT adamc realtimeoutputgapsintheestimationoftaylorrulesaredherring AT cobhamd realtimeoutputgapsintheestimationoftaylorrulesaredherring |