Determining potential output and the output gap-two inherently unobservable variables-is a major challenge for macroeconomists. This paper presents the R package sectorgap, which features a flexible modeling and estimation framework for a multivariate Bayesian state space model identifying...

The sovereign debt crisis triggered a process of reforms in European economic governance that pushed for technocratic handling of budget decisions following standardized procedures, target measures, and indicators for fiscal monitoring. This shift, aimed at producing more stability and less...

Output gap revisions can be large even after many years. Real-time reliability tests might therefore be sensitive to the choice of the final output gap vintage that the real-time estimates are compared to. This is the case for the Federal Reserve's output gap. When accounting for revisions in...

We propose a multivariate Bayesian state space model to identify potential growth and the output gap consistent with the dynamics of the underlying production sectors of the economy and those of inflation and the labor market. Our approach allows us to decompose economic fluctuations and...

The recent multidimensional crisis has harmed the global economy because countries are currently integrated. In this study, we examine the spillover effect of the United States (US) interest rate on the output gap of ASEAN+3 countries using the dynamic spatial Durbin model from 2010 to 2020....

This study examined the determinants of fiscal space within the Sub-Saharan Africa (SSA) region, utilising a panel of 33 countries from 2005 to 2021. The paper applied the panel threshold, difference, and system generalised method of moments (GMM) regression techniques. The empirical results...

We examine how demographic factors influence potential output, focusing on how the age distribution of the working-age population and the old-age dependency ratio affect aggregate productivity. Following Feyrer (2007), we emphasize that the contribution to aggregate productivity varies by age...

We study optimal monetary policy in an analytically tractable New Key-nesian DSGE-model with an emission externality. Empirically, emissions are strongly pro-cyclical and output in the flexible price equilibrium overreacts to productivity shocks, relative to the efficient allocation. At the same...

Star variables, such as potential output and the neutral real interest rate, are fundamental to economic policymaking but challenging to identify due to their latent nature. Buncic, Pagan, and Robinson (2023) highlight the difficulty of identifying star variables within short macroeconomic...

We study optimal monetary policy in an analytically tractable New Key-nesian DSGE-model with an emission externality. Empirically, emissions are strongly pro-cyclical and output in the flexible price equilibrium overreacts to productivity shocks, relative to the efficient allocation. At the same...

We consider which labor market variables are the most informative for estimating and nowcasting the US output gap using a multivariate trend-cycle decomposition. Although the unemployment rate clearly contains important cyclical information, it also appears to reflect more persistent movements...

The German economy is an important economic driver in the Euro-area in terms of gross domestic product, labour force and international integration. We provide a state of the art estimate of the German output gap between 1995 and 2022 and present a nowcasting scheme that accurately predicts the...

We estimate the euro area output gap by applying the Beveridge-Nelson decomposition based on a large Bayesian vector autoregression. Our approach incorporates multivariate information through the inclusion of a wide range of variables in the analysis and addresses data issues associated with the...

Using the Reserve Bank of Australia's MARTIN model we compare actual monetary policy decisions to a counterfactual in which the cash rate is set according to an optimal simple rule. We find that monetary policy played a crucial role in avoiding a potential recession in 2001 and mitigating the...

Using the Reserve Bank of Australia's MARTIN model we compare actual monetary policy decisions to a counterfactual in which the cash rate is set according to an optimal simple rule. We find that monetary policy played a crucial role in avoiding a potential recession in 2001 and mitigating the...

This study analyzes the relationships between domestic and foreign output gaps, current-account imbalances, and real effective exchange-rate (REER) misalignments. We first set up a theoretical framework based on the elasticities and absorption approaches of the balance of payments to derive and...

Assessing potential output and the output gap is essential for policy-making and fiscal surveillance. The European Commission proposes a production function methodology that involves the estimation of two classes of Gaussian state space models. This paper presents the R package RGAP which...

This paper estimates potential growth in Turkey using a production function estimation approach. Our approach aims to measure the inputs of production in the most detailed fashion that is possible and empirically addresses concepts of sustainable potential growth for Turkey. While developing...

Standard theory of consumer behavior stands on the maxim of utility maximization. Optimizing behavior of consumer is achieved by maximization of utility subject to budget constraint. An increase in inflation that is not accompanied by proportionate increase in income can leave a consumer worse...

Determining potential output and the output gap-two inherently unobservable variables-is a major challenge for macroeconomists. This paper presents the R package sectorgap, which features a flexible modeling and estimation framework for a multivariate Bayesian state space model identifying...

The macroeconomic models used by major institutions including the Federal Reserve and the International Monetary Fund (IMF) failed to predict the inflation surge during 2021-2023. The output gap, the unemployment gap, the New Keynesian Phillips curve and inflation expectations did not give...

The sovereign debt crisis triggered a process of reforms in European economic governance that pushed for technocratic handling of budget decisions following standardized procedures, target measures, and indicators for fiscal monitoring. This shift, aimed at producing more stability and less...

The projected increase in extreme climate events in the coming decades is likely to exacerbate the existing productivity and demographic challenges facing Europe. We study the dynamic, medium-run macroeconomic effects of heatwaves, droughts and floods in 1160 EU regions through the lens of a...

Deutschland erlebt derzeit einen erheblichen Rückgang seines Produktionspotenzials. Wesentliche Ursache ist die demografische Alterung und insbesondere der Eintritt der geburtenstarken Jahrgänge (Baby-Boomer) in den Ruhestand. Das verfügbare Arbeitsvolumen wird darüber hinaus durch niedrige...