Univariate filters used in output gap estimation are subject to criticism as being purely statistical and having no economic content. The information content of the output gap measures estimated by standard multivariate filtering techniques, on the other hand, can be distorted because of the...

This paper presents a time-varying parameter methodology for constructing an estimate of output gap for Turkey. We employ the extended Kalman filter technique in a multivariate setting in which economic content is utilized by the inclusion of inflation and output gap dynamics. As a by-product,...