UNOBSERVED COMPONENTS MODELS FOR ESTIMATING THE OUTPUT GAP OF THE CZECH ECONOMY

Output gap belongs between imporant indicator of central banks by their executing monetary policy despite output gap is an unobservable variable. Because of importance of accurate measurement of output gap, there are more methods for estimation. The aim of this paper is to discover if univariate and multivariate unobserved components models contribute to more precise measurement of output gap. For confirmation or refusal of this hypothesis, Clark's model (1989) and Kuttner's model (1994) will be used. All two models will be analysed and their advantages and disadvantages will be shown. Results of estimations will be compared with papers dealing with output gap for czech economy. Then, the ability of output gap to forecast inflation will be analysed. At last, multivariate unobserved componenets model will be labeled after some tests as the most suitable method for estimation of output gap.