Improving real-time estimates of output and inflation gaps with multiple-vintage models

Clements, M. P. ORCID: https://orcid.org/0000-0001-6329-1341 and Galvao, A. B. (2012) Improving real-time estimates of output and inflation gaps with multiple-vintage models. Journal of Business and Economic Statistics, 30 (4). pp. 554-562. ISSN 0735-0015 doi: 10.1080/07350015.2012.707588

Abstract/Summary

Real-time estimates of output gaps and inflation gaps differ from the values that are obtained using data available long after the event. Part of the problem is that the data on which the real-time estimates are based is subsequently revised. We show that vector-autoregressive models of data vintages provide forecasts of post-revision values of future observations and of already-released observations capable of improving estimates of output and inflation gaps in real time. Our findings indicate that annual revisions to output and inflation data are in part predictable based on their past vintages.