Description

Among the variables that play cr itical roles in the design of monetary policy, several are unobservable. These include such key variables as the neutral r eal rate of interest, the output gap, and the natural rate of unemploym ent. While individual central banks have undertaken efforts to estimate these unobservabl es, the approaches ha ve generally been country specific and have not provided eith er systematic estimation or comparison across countries. We adopt a common estima tion approach, applied to a parsimonious monetary-policy model, to pr ovide consistent estimates of key unobservables for the U.S., the Eurozone, and Japan, and several inflation-targeting c ountries: Australia, Canada, Chile, New Zealand, Norway, Sweden, and the U.K. Doing so allows us to obtain comparable measures of unobservables across a range of co untries. We exploit our estimates to investigate issues of comm onalities and convergence across countries in these key but unobs ervable variables.