The effective conduct of monetary policy is complicated by uncertainty about the level of potential output, and thus about the size of the monetary policy response that would be sufficient to achieve the targeted inflation rate. One possible response to such uncertainty is for the monetary...

The aim of this paper is to achieve a reliable estimate of the output gap for Italy through the development of several models within the class of the unobserved component time series models. These formulations imply the decomposition of output into a trend component (the 'potential output') and...

The output gap, defined as actual less potential output, is an important variable in its own right and as an indicator of incipient changes in inflation. This paper reviews five methods of estimating it for Australian GDP data, including linear time trends, Hodrick-Prescott (HP) filter trends,...

This paper proposes a new approach for estimating potential output and the NAIRU. The methodology models these key unobservable economic variables as latent stochastic trends within a trivariate system of observables comprising information on unemployment, GDP, and inflation. Identification is...