Measuring the Output Gap Using Stochastic Model Specification Search

Angelia Grant and Joshua Chan (2017)
CAMA Working Paper 2/2017
[ Working Paper | Code ]

This code estimates the output gap from a new trivariate unobserved components model of output, inflation and unemployment. The novelty is to use stochastic model specification search to navigate the vast model space of different combinations of variables used, output trend specifications and distributional assumptions.

In addition to output gap estimates, the model also produces trend inflation and NAIRU estimates.