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RePEc: Research Papers in Economics
Visualizing the Invisible: Estimating the New Keynesian Output Gap via a Bayesian Approach
Tim Willems

Paper Summary

The article uses a new method to estimate the natural level of output and the New Keynesian output gap. By applying a Bayesian approach to a model, the researchers separate trend from cycle to get more accurate estimates. They find that this method is especially useful for real-time analysis, which could help improve monetary policy decisions.

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