Real-time output gap estimation in Japan revolutionizes inflation forecasting.
The paper looks at how the Bank of Japan estimates the output gap in real-time. It discusses different methods used and their pros and cons. The study shows that the real-time output gap can be noisy, affecting inflation forecasting. It also explores how this estimation issue impacts policy evaluation. Lastly, the paper suggests using TANKAN data to improve the real-time output gap's usefulness.