Parsing shocks: real-time revisions to gap and growth projections for Canada
Abstract: The output gap - the deviation of output from potential output - has played an important role in the conduct of monetary policy in Canada. This paper reviews the Bank of Canada's definition of potential output, as well as the use of the output gap in monetary policy. Using a real-time staff economic projection dataset from 1994 through 2005, a period during which the staff used the Quarterly Projection Model to construct economic projections, the authors investigate the relationship between shocks (data revisions or real-time projection errors) and revisions to projections of key macroeconomic variables. Of particular interest are the interactions between shocks to real gross domestic product (GDP) and inflation and revisions to the level of potential output, potential growth, the output gap, and real GDP growth.
Status: Published in Proceedings of the Thirty-Third Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis : Projecting Potential Growth: Issues and Measurement
File(s): File format is application/pdf https://files.stlouisfed.org/files/htdocs/publications/review/09/07/Barnett.pdf
Provider: Federal Reserve Bank of St. Louis
Part of Series: Review
Publication Date: 2009