An Exploration of Real-Time Revisions of Output Gap Estimates Across European Countries
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Citations
Fiscal expenditure spillovers in the euro area: An empirical and model-based assessment
Brexit: current situation and outlook
Determinants of investment in tangible and intangible fixed assets
Mapa de exposición internacional de la economía española
Structural transformation in the Spanish economy
References
The production function methodology for calculating potential growth rates and output gaps
Housing Cycles in the Major Euro Area Countries
The reliability of real-time estimates of the euro area output gap
The Spanish Economic Crisis: Key Factors and Growth Challenges in the Euro Area
Tracking the future on the web: construction of leading indicators using internet searches
Related Papers (5)
Filling the gap: open economy considerations for more reliable potential output estimates. Bruegel Working Paper 2015/11, October 2015
Frequently Asked Questions (9)
Q2. How does the European Commission infer the output gap?
since potential GDP cannot be directly observed from economic data, the European Commission infers the output gap using a production function approach (see Havik et al., 2014).
Q3. What is the main reason why the output gap estimates are often over-estimated?
In particular, it is often justifi ed that the lack of reliability of output gap estimates should lead to less weight being attributed to the concept of structural balances in respect of the fi scal rules that could be substituted for an expenditure rule in which the ceiling on public expenditure growth would be linked to the evolution of (past and future) GDP growth.
Q4. What are the main implications of the output gap revisions?
The authors also show how revisions in output gaps can be decomposed into revisions in real GDP forecast errors, GDP data revisions and potential GDP, with forecast errors chiefl y responsible for the overall real-time revisions in output gaps and their cyclicality.
Q5. What is the definition of asymmetric revisions?
The authors label as asymmetric those revisions that are positive in expansions and negative in recessions; according to this terminology, symmetric revisions would always be either positive or negative.
Q6. what is the impact of a negative bias on real-time output gaps?
In particular, inthe case of the implications for fi scal policy, on which this paper focuses, if a negative bias on real-time output gaps is confi rmed, this would imply that structural fi scal balances estimated in real time would on average be overestimated (and structural fi scal defi cits underestimated), thus providing an optimistic view of the underlying fi scal position of countries.
Q7. What is the main argument of Kempkes?
This fi nding casts doubt over the result by Kempkes (2014), who argues that resulting structural balances are always over-estimated in real time because output gaps are downward-biased in real time.
Q8. What is the importance of the output gap for policy analysis?
Both levels and changes of output gaps can play an important role in the conduct of monetary policy as an indication of infl ationary pressures.
Q9. What is the reason for the revisions of output gaps estimated in real time?
revisions of output gaps estimated in real time might be due to changes in the modelling techniques employed, which could be based on new theoretical or empirical fi ndings regarding the economy under consideration.