Reliable real-time estimates of the euro-area output gap

Abstract

The paper provides real-time estimates of the euro-area output gap, based on a standard medium scale DSGE model estimated recursively with Bayesian techniques over the period 1985q1-2019q2. Unlike measures of output gap obtained by means of statistical filtering techniques, real-time DSGE-based estimates are remarkably stable and hence are less prone to ex-post revisions, which implies a higher reliability over time of model-based measures of the output gap.