The Reliability of Real Time Estimates of the Euro Area Output Gap
Massimiliano Giuseppe Marcellino
European University Institute; Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)
European Central Bank (ECB)
CEPR Discussion Paper No. DP7716
This paper provides evidence on the reliability of euro area real-time output gap estimates, including those provided by the IMF, OECD and EC and a set of model based measures. A genuine real-time data set is used, including vintages of several sets of euro area output gap estimates available from 1999 to 2006. It turns out that real-time estimates of the output gap are characterised by a high degree of uncertainty, much higher than that resulting from model and estimation uncertainty only. In particular, the evidence indicates that both the magnitude and the sign of the real-time estimates of the euro area output gap are very uncertain. The uncertainty is mostly due to parameter instability, while data revisions seem to play a minor role. To benchmark our results, we repeat the analysis for the US over the same sample. It turns out that US real time estimates are much more correlated with final estimates than for the euro area, data revisions play a larger role, but overall the unreliability in real time of the US output gap measures detected in earlier studies is confirmed in the more recent period.
Number of Pages in PDF File: 35
Keywords: data revisions, euro area, Output gap, real-time data
JEL Classification: E31, E37, E52, E58working papers series
Date posted: March 9, 2010
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