2 Annual and quarterly data on German GDP are decomposed into a nonstationary trend, a stationary cycle and a seasonal component using Kalman filtering and smoothing techniques. The computed trend components of the unobserved component models are then used to calculate annual and quarterly output gap measures for the German economy.

Recent work on the design of monetary policy reflects a general consensus on the appropriate objectives of monetary policy. As articulated by Svensson, “....there is considerable agreement among academics and central bankers that the appropriate loss function both involves stabilizing inflation around an inflation target and stabilizing the real economy, represented by the output gap” (Lars E. ...

The decline in output volatility in the US has been variously ascribed to changes in the policy regime reflected in inflation volatility, improved stockholding and increased international integration. We investigate output volatility in the G7 in a panel context treating these as competing explanations. We show that an encompassing panel has a significant role for both net financial wealth and ...

What measure of economic activity, if any, should be targeted in simple interest rate rules? This paper analyzes the welfare consequences of responding to the growth rate of output and the output gap in policy rules in a conventional New Keynesian model. In spite of the fact that it shows up directly in the approximate welfare criterion of the simplest version of the model, responding to the th...