Working Paper
Time-varying Uncertainty of the Federal Reserve’s Output Gap Estimate
Berge, Travis J. (2021-04-14)
A factor stochastic volatility model estimates the common component to estimates of the output gap produced by the staff of the Federal Reserve, its time-varying volatility, and time-varying, horizon-specific forecast uncertainty. Output gap estimates are very uncertain, even well after the fact, especially at business cycle turning points. However, the common component of the output gap estimates is clearly procyclical, and innovations to the common factor produce persistent positive effects on economic activity. Output gaps estimated by the Congressional Budget Office have very similar ...
Finance and Economics Discussion Series , Paper 2020-012r1

Working Paper
Time-varying Uncertainty of the Federal Reserve’s Output Gap Estimate
Berge, Travis J. (2020-02-03)
What is the output gap and when do we know it? A factor stochastic volatility model estimates the common component to forecasts of the output gap produced by the staff of the Federal Reserve, its time-varying volatility, and time-varying, horizon-specific forecast uncertainty. The common factor to these forecasts is highly procyclical, and unexpected increases to the common factor are associated with persistent responses in other macroeconomic variables. However, output gap estimates are very uncertain, even well after the fact. Output gap uncertainty increases around business cycle turning ...
Finance and Economics Discussion Series , Paper 2020-012

Working Paper
How Well Does Economic Uncertainty Forecast Economic Activity?
Rogers, John H.; Xu, Jiawen (2019-12-16)
Despite the enormous reach and influence of the literature on economic and economic policy uncertainty, one surprisingly under-researched topic has been the forecasting performance of economic uncertainty measures. We evaluate the ability of seven popular measures of uncertainty to forecast in-sample and out-of-sample over real and financial outcome variables. We also evaluate predictive content over different quantiles of the GDP growth distribution. Real-time data and estimation considerations are highly consequential, and we devote considerable attention to them. Four main findings ...
Finance and Economics Discussion Series , Paper 2019-085