Projects per year
Abstract
We propose a way to directly nowcast the output gap using the Beveridge–Nelson decomposition based on a mixed-frequency Bayesian VAR. The mixed-frequency approach produces similar but more timely estimates of the U.S. output gap compared to those based on a quarterly model, the CBO measure of potential, or the HP filter. We find that within-quarter nowcasts for the output gap are more reliable than for output growth, with monthly indicators for a credit risk spread, consumer sentiment, and the unemployment rate providing particularly useful new information about the final estimate of the output gap. An out-of-sample analysis of the COVID-19 crisis anticipates the exceptionally large negative output gap of −8.3% in 2020Q2 before the release of real GDP data for the quarter, with both conditional and scenario nowcasts tracking a dramatic decline in the output gap given the April data.
Original language | English |
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Pages (from-to) | 18-34 |
Number of pages | 17 |
Journal | Journal of Econometrics |
Volume | 232 |
Issue number | 1 |
DOIs | |
Publication status | Published - Jan 2023 |
Keywords
- COVID-19
- Nowcasting
- Output gap
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Financial Cycles and the Macroeconomy
Australian Research Council (ARC)
21/02/20 → 20/02/24
Project: Research
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Understanding the Sources of Secular Stagnation
Morley, J., Wong, B. & Eo, Y.
5/03/19 → 4/03/22
Project: Research
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New Methods for Incorporating Financial Factors in Estimating Potential Output
Wong, B., Berger, T. & Richter, J.
1/01/19 → 31/12/22
Project: Research