The (Un)Reliability of Real-Time Output Gap Estimates with Revised Data

This paper investigates the differences between real-time and ex-post output gap estimates using a newly-constructed international real-time data set over the period from 1973:Q1 to 2012:Q3. We extend the findings in Orphanides and van Norden (2002) for the United States that the use of ex-post information in calculating potential output, not the data revisions themselves, is the major cause of the difference between real-time and ex-post output gap estimates to nine additional OECD countries. The results are robust to the use of linear, quadratic, Hodrick-Prescott, Baxter-King, and Christiano-Fitzgerald detrending methods. By using quasi real-time methods, reliable real-time output gap estimates can be constructed with revised data. Key Words: Output gap, real-time data, data revision, business cycles