Skip to main content

A new measure of US potential output, inflation forecasts, and monetary policy rules

Journal Article


Abstract


  • This paper proposes a new measure of potential output for the USA. The

    key idea is that potential output is constructed as the level of output

    which would correspond to a forecast of no inflation change over the

    policy horizon. The resultant output gap has a clear interpretation as a

    measure to gauge future inflationary pressures. It also exhibits better

    predictability for future inflation changes in comparison with previous

    output gap measures. Simulation results further demonstrate its usefulness

    as a feedback variable in the Taylor monetary policy rule for interest

    rates.

Publication Date


  • 2009

Citation


  • Harvie, C. & Huh, H. (2009). A new measure of US potential output, inflation forecasts, and monetary policy rules. Manchester School, 77 (5), 611-631.

Scopus Eid


  • 2-s2.0-68249137280

Ro Metadata Url


  • http://ro.uow.edu.au/commpapers/3036

Number Of Pages


  • 20

Start Page


  • 611

End Page


  • 631

Volume


  • 77

Issue


  • 5

Place Of Publication


  • http://www.wiley.com/bw/journal.asp?ref=1463-6786

Abstract


  • This paper proposes a new measure of potential output for the USA. The

    key idea is that potential output is constructed as the level of output

    which would correspond to a forecast of no inflation change over the

    policy horizon. The resultant output gap has a clear interpretation as a

    measure to gauge future inflationary pressures. It also exhibits better

    predictability for future inflation changes in comparison with previous

    output gap measures. Simulation results further demonstrate its usefulness

    as a feedback variable in the Taylor monetary policy rule for interest

    rates.

Publication Date


  • 2009

Citation


  • Harvie, C. & Huh, H. (2009). A new measure of US potential output, inflation forecasts, and monetary policy rules. Manchester School, 77 (5), 611-631.

Scopus Eid


  • 2-s2.0-68249137280

Ro Metadata Url


  • http://ro.uow.edu.au/commpapers/3036

Number Of Pages


  • 20

Start Page


  • 611

End Page


  • 631

Volume


  • 77

Issue


  • 5

Place Of Publication


  • http://www.wiley.com/bw/journal.asp?ref=1463-6786