Economic Quarterly

2007

 

Spring 2007

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

Mark W. Watson

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.



Topics: Economic Growth
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