Using real-time output gaps to examine past and future policy choices

Christopher Adam, David Cobham

    Research output: Contribution to journalArticle

    2 Citations (Scopus)

    Abstract

    Alternative measures of the UK output gap are considered for 1984-2007. The real-time series is strongly affected by the rolling-time estimation of the trend, and produces a picture of the business cycle which is not consistent with contemporary perceptions of the large fluctuations of the late 1980s and early 1990s. A new, 'nearly-real', measure developed here may be better for estimating historical reaction functions. In the context of the current recession, none of these mechanically derived measures of the output gap are useful. Policymakers should make careful estimates of the likely fall in potential output on the basis of other information.

    Original languageEnglish
    Pages (from-to)98-110
    Number of pages13
    JournalNational Institute Economic Review
    Volume210
    Issue number1
    DOIs
    Publication statusPublished - Oct 2009

    Keywords

    • Nearly real
    • Output gap
    • Quasi-real
    • Real-time
    • Taylor rule

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