Affiliation:
1. Board of Governors of the Federal Reserve 20th and C St, NW Washington, DC 20551 travis.j.berge@frb.gov
Abstract
Abstract
A factor stochastic volatility model estimates the common component to output gap estimates produced by the staff of the Federal Reserve, its time-varying volatility, and time-varying, horizon-specific forecast uncertainty. The output gap estimates are uncertain even well after the fact. Nevertheless, the common component is clearly procyclical, and positive innovations to the common component produce movements in macroeconomic variables consistent with an increase in aggregate demand. Heightened macroeconomic uncertainty, as measured by the common component's volatility, leads to persistently negative economic responses.
Subject
Economics and Econometrics,Social Sciences (miscellaneous)
Cited by
1 articles.
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