Working Paper Revision

A Unified Framework to Estimate Macroeconomic Stars

Abstract: This paper develops a semi-structural model to jointly estimate “stars” — long-run levels of output (its growth rate), the unemployment rate, the real interest rate, productivity growth, price inflation, and wage inflation. It features links between survey expectations and stars, time-variation in macroeconomic relationships, and stochastic volatility. Survey data help discipline stars’ estimates and have been crucial in estimating a high-dimensional model since the pandemic. The model has desirable real-time properties, competitive forecasting performance, and superior fit to the data compared to variants without the empirical features mentioned above. The by-products are estimates of various objects of great interest to the broader profession.

Keywords: state-space models; Bayesian analysis; time-varying parameters; natural rates; survey expectations; COVID-19 pandemic;

JEL Classification: C5; E24; E31; E4; O4;

https://doi.org/10.26509/frbc-wp-202123r2

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers

Publication Date: 2024-05-31

Number: 21-23R2

Note: Online Appendix: https://www.clevelandfed.org/-/media/project/clevelandfedtenant/clevelandfedsite/publications/working-papers/2024/wp2123r2_appendix.pdf

Related Works

• Working Paper Revision: A Unified Framework to Estimate Macroeconomic Stars
• Working Paper Revision: A Unified Framework to Estimate Macroeconomic Stars