Author: Mr.Jiaqian Chen

Publisher: International Monetary Fund

Published: 2020-02-07

Total Pages: 28

ISBN-13: 151352786X

We apply a range of models to the U.K. data to obtain estimates of the output gap. A structural VAR with an appropriate identification strategy provides improved estimates of output gap with better real time properties and lower sensitivity to temporary shocks than the usual filtering techniques. It also produces smaller out-of-sample forecast errors for inflation. At the same time, however, our results suggest caution in basing policy decisions on output gap estimates.