Information rigidities and the news-adjusted output gap

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Garratt, Anthony, Lee, Kevin and Shields, Kalvinder (2016) Information rigidities and the news-adjusted output gap. Journal of Economic Dynamics and Control, 70 . pp. 1-17. ISSN 01651889

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Official URL: http://www.sciencedirect.com/science/article/pii/S0165188916301038

Abstract

A vector-autoregressive model of actual output and expected output obtained from surveys is used to test for information rigidities and to provide a characterisation of output dynamics that accommodates these information structures. News on actual and expected outputs is decomposed to identify innovations understood to have short-lived effects and these are used with the model to derive a ‘news-adjusted output gap׳ measure. The approach is applied to US data over 1970q1–2014q2 and the new gap measure is shown to provide a good leading indicator of inflation.

Item Type:	Article
RIS ID:	https://nottingham-repository.worktribe.com/output/975021
Keywords:	Information rigidities; Survey-based expectations; Output gap
Schools/Departments:	University of Nottingham, UK > Faculty of Social Sciences > School of Economics
Identification Number:	https://doi.org/10.1016/j.jedc.2016.06.004
Depositing User:	Eprints, Support
Date Deposited:	11 Jul 2016 10:07
Last Modified:	04 May 2020 20:01
URI:	https://eprints.nottingham.ac.uk/id/eprint/34789

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