Working Paper: CEPR ID: DP3393
Authors: Stefan Gerlach; Matthew Yiu
Abstract: This Paper estimates output gaps for Hong Kong, Korea, the Philippines, Singapore and Taiwan, employing the HP filter and unobservable-components (UC) techniques. The latter approach assumes that actual output is the sum of potential output, which follows a random walk with a time-varying drift, and a stationary output gap. While the results imply that UC methods are useful in estimating output gaps in Asia, simple Phillips curves suggest that the information contents of the two measures of the gap are essentially identical. The main advantage of the UC technique is that it allows the construction of confidence bands for the gap.
Keywords: Kalman Filtering; Output Gaps; Unobservable Components
JEL Codes: E30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| UC method (Y50) | output gap (E23) |
| HP filter (L63) | output gap (E23) |
| output gap (E23) | inflationary pressures (E31) |
| UC method (Y50) | inflationary pressures (E31) |
| HP filter (L63) | inflationary pressures (E31) |