A Unified Framework to Estimate Macroeconomic Stars

Abstract This paper develops a semi-structural model to jointly estimate “stars” — long-run levels of output (its growth rate), unemployment rate, real interest rate, productivity growth, price inflation, and wage inflation. It features links between survey expectations and stars, time-variation in macroeconomic relationships, and stochastic volatility. Survey data help discipline stars' estimates and have been crucial in estimating a high-dimensional model since the pandemic. The model has desirable real-time properties, competitive forecasting performance, and superior fit to the data compared to variants without the empirical features mentioned above. The by-products are estimates of various objects of great interest to the broader profession.