Estimating the output gap in real time
Abstract: I propose a novel method of estimating the potential level of U.S. GDP in real time. The proposed wage-based measure of economic potential remains virtually unchanged when new data are released. The distance between current and potential output ? the output gap ? satisfies Okun?s law and outperforms many other measures of slack in forecasting inflation. Thus, I provide a robust statistical tool useful for understanding current economic conditions and guiding policymaking.
File format is application/pdf
Description: Full text
Provider: Federal Reserve Bank of Dallas
Part of Series: Staff Papers
Publication Date: 2013
Issue: DecOrder Number: 22