How Accurate are Real-Time Estimates of Output Trends and Gaps?

Abstract

Real-time estimates of output gaps and trends are important tools for macroeconomic analysis. But how accurate are estimates of real-time gaps and trends? This article discusses the problem of estimating gaps and trends in real time and constructs measures of their precision. The analysis is based on band-pass filtering methods augmented with univariate forecasts. The empirical analysis suggests that there is considerable uncertainty associated with real-time estimates of trends and gaps.