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Journal Article•DOI•

An Exploration of Real-Time Revisions of Output Gap Estimates Across European Countries

Pablo Hernández de Cos1, Aitor Lacuesta1, Enrique Moral-Benito2, Enrique Moral-Benito1•
Bank of Spain1, Charles III University of Madrid2
28 Jul 2016-Social Science Research Network-
TL;DR: In this article, the authors analyzed real-time revisions in output gap estimates published by the European Commission for 15 countries over the period 2002-2014 and found that output gap revisions are mainly driven by GDP growth forecast errors.
Abstract: This document analyses real-time revisions in output gap estimates published by the European Commission for 15 countries over the period 2002-2014. We find that output gap revisions (both in levels and changes) are mainly driven by GDP growth forecast errors. Also, output gap revisions have opposite signs across expansions and recessions: real-time output gaps are downward biased (smaller than the final estimates) during expansions and upward biased (higher than the final estimates) in recessions. Our findings may have relevant implications for the conduct and assessment of fiscal policy in real time. For instance, according to our results, real-time estimates of the structural balance would be upward biased in expansions and downward biased in recessions. This implies that the fiscal stance of an economy estimated in real time would be excessively expansionary in recessions as compared to the final estimate. As a result, we argue that corrections to real-time estimates of the structural balance suggested in the literature should be contingent on the degree of slack in the economy.

Summary (2 min read)

Jump to: [1 Introduction] – [2 Data] – [REAL AND POTENTIAL GROWTH REVISIONS] – [SOURCES OF REAL GROWTH REVISIONS] and [5 Concluding Remarks]

1 Introduction

  • The output gap is the extent to which the level of aggregate economic activity exceeds (or falls short of) the economy's productive capacity, i.e. the gap between actual and potential output.
  • It is very often the case that these methods provide different results.
  • These empirical regularities are of course important for policy analysis.
  • According to their fi ndings, the bias in structural balances cannot be systematically corrected as it depends on the state of the economy; (ii) the same happens with the real-time revisions of the changes in the output gaps.

2 Data

  • The authors data are taken from the European Commission's real-time output gap database.
  • In particular, chart 1 shows that output gap revisions are signifi cant in terms of magnitude with an average change of 0.71 pp.
  • In the case of Spain, the revisions during expansions are around 4.4 pp. on average, while the magnitude in recession periods is lower but still large, at -2.0 pp.
  • According to these results, while the over-estimation of structural balances advocated by Kempkes (2014) holds during expansions, it becomes an under-estimation during recessions.
  • To shed some more light on the factors behind the revisions to real time output gaps in levels, the authors fi rst explore the role played by revisions in GDP growth and potential growth, which are the main determinants of output gap estimates.

REAL AND POTENTIAL GROWTH REVISIONS

  • (ΔlnY t t+1 -ΔlnY t t-1 ) = (Data revision) + (Forecast error) where superscripts refer to the year in which the GDP growth chart is released.
  • In contrast, any revision between the forecast publication at t-1 and the data release at t+1 is assumed to be entirely due to forecast errors.
  • The average revision in GDP growth during recessions is -2.99, which is the sum of an average forecast error of -2.88pp.
  • This correlation vanishes when the authors consider revisions in potential growth estimates.
  • Indeed, a regression of the three factors confi rms that revisions in GDP growth are able to explain around 40% of the change in output gap revisions and its associated coeffi cient is signifi cant, while the coeffi cient on potential growth revisions is not signifi cant and the corresponding R2 falls from 40% to 2%.

SOURCES OF REAL GROWTH REVISIONS

  • This decomposition allows us to quantify the contributions of historical real-time revisions in GDP and potential growth together with the initial output gap revisions.
  • In addition, the authors can also decompose the revisions in actual GDP growth into data revisions and forecast errors as described above.
  • To be more specifi c, the authors use this decomposition for the case of Spain in Chart 9 to confi rm that forecast errors (brown bar) are the main driver of the magnitude and the symmetric behavior of revisions in output gaps (blue line).
  • Note also that the residual (yellow bar) includes not only the initial revision in the output gap -2004 in their data -but also the numerical error due to the logarithmic approximation of the decomposition.

5 Concluding Remarks

  • The authors have analysed the size and the cyclical behavior of revisions of the output gap in levels and changes.
  • This defi nition of real time is relevant within several fi scal rules such as those used in the Excessive Defi cit Procedure of the European Union.
  • Moreover, the authors fi nd that revisions in output gap levels are primarily due to macroeconomic forecasting errors, while data updates play a minor role.
  • According to this pattern, while the over-estimation of structural balances advocated by Kempkes (2014) holds during expansions, it turns to under-estimation during recessions.
  • Turning to real time revisions in potential growth fi gures, the authors fi nd that they are not only smaller than those of actual GDP, but also symmetric across expansion and recession (i.e. real time potential growth estimates are always larger than the fi nal estimates regardless of the cycle).

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Content maybe subject to copyright    Report

AN EXPLORATION OF REAL-TIME
REVISIONS OF OUTPUT GAP
ESTIMATES ACROSS EUROPEAN
COUNTRIES
Documentos Ocasionales
N.º 1605
Pablo Hernández de Cos, Aitor Lacuesta
and Enrique Moral-Benito
2016
AN EXPLORATION OF REAL-TIME REVISIONS OF OUTPUT GAP ESTIMATES
ACROSS EUROPEAN COUNTRIES
Documentos Ocasionales. N.º 1605
2016
Pablo Hernández de Cos, Aitor Lacuesta and Enrique Moral-Benito
BANCO DE ESPAÑA
AN EXPLORATION OF REAL-TIME REVISIONS OF OUTPUT GAP
ESTIMATES ACROSS EUROPEAN COUNTRIES
The Occasional Paper Series seeks to disseminate work conducted at the Banco de España, in the
performance of its functions, that may be of general interest.
The opinions and analyses in the Occasional Paper Series are the responsibility of the authors and,
therefore, do not necessarily coincide with those of the Banco de España or the Eurosystem.
The Banco de España disseminates its main reports and most of its publications via the INTERNET at the
following website: http://www.bde.es.
Reproduction for educational and non-commercial purposes is permitted provided that the source is
acknowledged.
© BANCO DE ESPAÑA, Madrid, 2016
ISSN: 1696-2230 (on line)
Abstract
This document analyses real-time revisions in output gap estimates published by the European
Commission for 15 countries over the period 2002-2014. We fi nd that output gap revisions
(both in levels and changes) are mainly driven by GDP growth forecast errors. Also, output
gap revisions have opposite signs across expansions and recessions: real-time output gaps
are downward biased (smaller than the fi nal estimates) during expansions and upward biased
(higher than the fi nal estimates) in recessions. Our fi ndings may have relevant implications for
the conduct and assessment of fi scal policy in real time. For instance, according to our results,
real-time estimates of the structural balance would be upward biased in expansions and
downward biased in recessions. This implies that the fi scal stance of an economy estimated in
real time would be excessively expansionary in recessions as compared to the fi nal estimate.
As a result, we argue that corrections to real-time estimates of the structural balance suggested
in the literature should be contingent on the degree of slack in the economy.
Keywords: Output-gaps, real-time data, fi scal policy.
JEL classifi cation: E32, E52, E60.
Citations
More filters
Posted Content•
Evaluating the macro-representativeness of a firm-level database: an application for the spanish economy

[...]

Miguel Almunia, David Lopez-Rodriguez, Enrique Moral-Benito
01 Mar 2018
TL;DR: In this paper, a new representative firm-level dataset for Spain using detailed micro-level information provided by firms to the Spanish Commercial Registry and the Bank of Spain is presented, which is able to replicate the growth rates of output, employment and wage bill of the private sector.
Abstract: espanolLa disponibilidad de una base de datos en el ambito de empresa que sea representativa del sector productivo de una economia a escala agregada es una condicion necesaria para realizar tanto analisis de politica economica como investigacion economica fiables en multiples areas. En este trabajo, se documenta la construccion de una nueva base de datos de empresas espanolas utilizando informacion detallada a escala microeconomica proporcionada por las empresas al Registro Mercantil y al Banco de Espana. La comparacion con los agregados que emergen de la Contabilidad Nacional sirve para ilustrar como la nueva base de datos de naturaleza microeconomica es capaz de replicar las tasas de crecimiento del producto, el empleo y la remuneracion de asalariados del sector privado. Utilizando las estadisticas ofi ciales del Instituto Nacional de Estadistica (INE), el analisis presentado muestra como la base de datos resultante cubre mas del 80 % de las empresas registradas en el censo del DIRCE en el periodo 2000-2013 y, de manera mas relevante, la base de datos es capaz de replicar la distribucion de empresas por tamano de la economia de mercado, excluyendo el sector financiero, de Espana. El mismo analisis de representatividad se realiza para el sector industrial, mostrando que este sector esta particularmente bien representado en la nueva base de datos. EnglishThe availability of a firm-level database that represents the productive sector of an economy at the aggregate level is a necessary condition to undertake both reliable policy analysis and economic research in multiple areas. In this paper, we document the construction of a new representative firm-level dataset for Spain using detailed micro-level information provided by firms to the Spanish Commercial Registry and the Bank of Spain. A comparison with National Accounts figures serves to illustrate that the new micro-dataset is able to replicate the growth rates of output, employment and wage bill of the private sector. Using official statistics from the National Institute of Statistics (INE), we show that the resulting dataset covers more than 80% of firms registered in the census over the years 2000-2013 and, more importantly, the resulting dataset replicates the fi rm size distribution of the Spanish non-financial market economy. The same representativeness analysis is done for the manufacturing sector indicating that this sector is particularly well-represented in the dataset.

47 citations

Book Chapter•DOI•
Determinants and Implications of Low Global Inflation Rates

[...]

Juan Carlos Berganza1, Fructuoso Borrallo1, Pedro del Río1•
Bank of Spain1
01 Jan 2018
TL;DR: In this article, the authors look at global inflation trends over the last decade and try to disentangle factors that could explain the ultra-low levels of inflation during the recovery from the Great Recession.
Abstract: In this chapter we look at global inflation trends over the last decade and try to disentangle factors that could explain the ultra-low levels of inflation during the recovery from the Great Recession. We review the literature on the subject, which points at possible structural shifts in price and wage setting processes in recent decades, such as changes in inflation’s cyclical sensitivity to economic slack, in the role being played by forward-looking and backward-looking inflation expectations, or in the relevance of global factors. We then test empirically whether changes in the coefficients of the Phillips curve in the wake of the global financial crisis can explain the behaviour of inflation over this period for a large group of advanced economies. Our results show a wide range of variation between countries, and in some cases the findings are insufficiently robust to offer a satisfactory explanation of the recent course of inflation. Nevertheless, the persistence of inflation and the increased importance of backward-looking inflation expectations in some countries may pose risks for inflation-expectation anchoring and central bank credibility. Finally, we review the adverse effects on the real economy of ultra-low inflation over an extended period and analyse the policy options for addressing this problem.

43 citations

Journal Article•DOI•
Monitoring the Spanish Economy From a Regional Perspective: Main Elements of Analysis

[...]

Concha Artola1, María Gil1, Javier J. Pérez1, Alberto Urtasun1, Alejandro Fiorito2, Diego Vila3 •
Bank of Spain1, National University of Luján2, University of Amsterdam3
27 Dec 2018-Social Science Research Network
TL;DR: In this paper, the authors provide an overview of the available data for monitoring macroeconomic and public finance developments at the regional level in Spain, and present some examples of its practical use in real time.
Abstract: In highly decentralized countries the subnational dimension of economic developments acquires particular relevance, given the existence of potential spillover effects across jurisdictions or the existence of asymmetric impacts of national-wide macroeconomic shocks. At the same time, though, the analysis of sub-national macroeconomic and public finance short-term developments tend to be restricted in many countries due to data limitations. Against this backdrop, the aim of this paper is to provide an overview of the available data for monitoring macroeconomic and public finance developments at the regional level in Spain, and to present some examples of its practical use in real time. After a thoroughly review of the publicly available information, we identify two key informational gaps in this area of conjunctural analysis, namely: (i) the lack of homogeneous and official quarterly measures of aggregate regional economic activity (in particular, real GDP), and (ii) the limited sample size of time series pertaining to government budgetary developments at the regional level.

42 citations

Posted Content•
An estimation of the effects of Brexit on trade and migration

[...]

Rodolfo G. Campos, Jacopo Timini
01 May 2019
TL;DR: In this article, the authors used a gravity model approach to estimate the effects of Brexit in two dimensions: trade in goods and migration, and found that trade flows are predicted to drop by 30% and migration by close to 25%.
Abstract: espanolEste documento utiliza un modelo de gravedad para estimar los efectos del brexit en dos dimensiones: el comercio de bienes y la migracion. Simulamos dos escenarios: 1) no acuerdo, con reversion a las reglas de la OMC y sin trato especial para los migrantes; 2) firma de un acuerdo bilateral de libre comercio (TLC). Segun nuestros resultados, el brexit puede tener efectos negativos importantes sobre el comercio y los flujos migratorios entre la UE y el Reino Unido. En el escenario de la OMC, se preve que los flujos comerciales disminuyan en un 30 % y la migracion en cerca de un 25 %. Si el Reino Unido y la UE firman un acuerdo similar a un TLC (que no incluye la libre movilidad de la mano de obra), los efectos negativos sobre el comercio se reducen, aunque no hay una diferencia significativa en terminos de migraciones con respecto al escenario de la OMC. EnglishThis paper uses a gravity model approach to estimate the effects of Brexit in two dimensions: trade in goods and migration. We simulate two scenarios: 1) no agreement with reversion to WTO rules and no special treatment for migrants; 2) signature of a bilateral free trade agreement (FTA). According to our results, Brexit may have large negative effects on trade and migration flows between the EU and the UK. In the WTO scenario, trade flows are predicted to drop by 30% and migration by close to 25%. If the UK and the EU sign an FTA-like agreement (which does not include free mobility of labour), the negative effects on trade are lessened although there is no significant difference in terms of migration with respect to the WTO scenario.

40 citations

Posted Content•
Microsimulation tools for the evaluation of fiscal policy reforms at the Banco de España

[...]

Olympia Bover, Jose Maria Casado, Esteban García-Miralles, Roberto Ramos, José M. Labeaga 
01 Oct 2017
TL;DR: In this paper, the authors present the use of microsimulation models developed at the Banco de Espana for the study of fiscal reforms, describing the tool used to evaluate changes in the Spanish personal income tax and also the one for the value added tax and excise duties.
Abstract: espanolEste documento presenta los modelos de microsimulacion desarrollados por el Banco de Espana para el estudio de reformas fiscales. Por un lado, describe la herramienta de microsimulacion que evalua cambios en el impuesto sobre la renta de las personas fisicas (IRPF). Por otro lado, explica la herramienta del impuesto sobre el valor anadido (IVA) y los impuestos especiales. Para cada una de estas dos herramientas, el documento detalla como se estructura, los datos usados y los resultados que genera. Tambien se muestran las capacidades de estas herramientas mediante ejemplos sencillos de reformas fiscales hipoteticas, presentadas exclusivamente para ilustrar el uso de estos simuladores. EnglishThis paper presents the microsimulation models developed at the Banco de Espana for the study of fiscal reforms, describing the tool used to evaluate changes in the Spanish personal income tax and also the one for the value added tax and excise duties. In both cases the structure, data and output of the model are detailed and its capabilities are illustrated using simple examples of hypothetical tax reforms, presented only to illustrate the use of these simulation tools.

40 citations

References
More filters
Una simulación de los efectos de la reforma del IRPF sobre la carga impositiva

[...]

Isabel Argimón Maza, Francisco de Castro Fernández, Angel Luis Gómez
01 Jan 2007
TL;DR: In this article, the authors used a sample of 2002 income tax returns to construct a baseline scenario for 2007 to simulate the Personal Income Tax Law and found that the reform will involve a moderate tax cut in relation to the baseline scenario, in relative terms, the tax reduction will be especially intense for lowest income and joint returns.
Abstract: The new Personal Income Tax Law came into force in January 2007. The main changes with respect to the previous regulation are the new tax treatment of personal and family circumstances and saving returns. This study aims to quantify the overall effect of the reform on tax revenue and to assess its redistributive impact by considering the different main income sources. In order to attain these objectives, we have used a Instituto de Estudios Fiscales sample of 2002 income tax returns to construct a baseline scenario for 2007 to simulate the reform. The reform will involve a moderate tax cut in relation to the baseline scenario. However, in relative terms, the tax reduction will be especially intense for lowest income and joint returns. The simulations show that when returns from saving are predominant fiscal burdens would be barely affected, although some disparities are observed within these returns depending on the specific kind of income. In this respect, the returns where dividend income and capital gains are predominant would suffer from a less favourable treatment with the reform, whereas the tax burden for those with interests as the major source of income would be reduced. Moreover, pensioners, recipients of business and professional incomes and dependent employees, though to a lower extent, would benefit from lower taxes. The changes in the tax rates and the new tax treatment of personal and family circumstances are estimated to be the main elements behind the tax reduction, followed by the increase of the allowance for dependent employment. Conversely, the tax burden would be scantly affected by new treatment of saving returns and capital gains. However, leaving aside the effects derived from the new treatment of dividend income, which would tend to increase tax payments, the implementation of a separate savings base would contribute to lower the tax burden. Lastly, the reform of the personal income tax is estimated to increase progressivity moderately, although lower tax revenues will imply lower redistributive capacity. It is worth noting that the underlying assumptions for the baseline scenario, the static nature of the simulation exercise and the lack of consideration of the population changes occurred since 2002 call for the results in this paper to be taken with due caution.

42 citations

Journal Article•DOI•
The unreliability of output-gap estimates in real time

[...]

Ahsan ul Haq Satti, Wasim Shahid Malik
01 Sep 2017-The Pakistan Development Review
TL;DR: Evidence of wrong estimates of output gap in real time data is found and the output gap measured using all the methods, except the linear trend method, appropriately portray the state of economy in the historical context.
Abstract: Most research on monetary policy assumes availability of information regarding the current state of economy, at the time of the policy decision. A key challenge for policy-makers is to find indicators that give a clear and precise signal of the state of the economy in real time—that is, when policy decisions are actually taken. One of the indicators used to asses the economic condition is the output gap; and the estimates of output gap from real time data misrepresents the true state of economy. So the policy decisions taken on the basis of real time noisy data are proved wrong when true data become available. Within this context we find evidence of wrong estimates of output gap in real time data. This is done by comparing estimates of output gap based on real time data with that in the revised data. The quasi real time data are also constructed such that the difference between estimates of output gap from real time data and that from quasi real time data reflects data revision and the difference between estimates of output gap from final data and that from quasi real time data portray other revisions including end sample bias. Moreover, output gap is estimated with the help of five methods namely the linear trend method, quadratic trend method, Hordrick-Prescott (HP) filter, production function method, and structural vector autoregressive method. Results indicate that the estimates of output gap in real time data are different from what have been found in final data but other revisions, compared to data revisions, are found more significant. Moreover, the output gap measured using all the methods, except the linear trend method, appropriately portray the state of economy in the historical context. It is also found that recessions can be better predicted by real time data instead of revised data, and final data show more intensity of recession compared with what has been shown in real time data

41 citations

Posted Content•
El empleo de las administraciones públicas en España: caracterización y evolución durante la crisis

[...]

Antonio Francisco Cubel Montesinos, Javier J. Pérez, Roberto Ramos
01 Aug 2014-Research Papers in Economics
TL;DR: In this paper, the authors analyze the evolution of General Government employment in Spain over the economic crisis and the recent fiscal consolidation process, and characterize the changes in the structure and composition of General government workforce between economics sectors, level of administration, and type of contract.
Abstract: We analyze the evolution of General Government employment in Spain over the economic crisis and the recent fiscal consolidation process. We characterize the changes in the structure and composition of General government workforce between economics sectors, level of administration, and type of contract. We also illustrate the impact of the most recent discretionary policy measures on the dynamics of hiring by the General Government sector and on the number of hours worked by public employees. In the paper we also provide review of the different statistical sources available on the number of public employees, including a discussion on their usefulness and an attempt at reconciling differences among them.

39 citations

Journal Article•DOI•
Employment Generation by Small Firms in Spain

[...]

Paloma Lopez-Garcia1, Sergio Puente2, Angel Luis Gómez2•
European Central Bank1, Bank of Spain2
04 Mar 2009-Social Science Research Network
TL;DR: In this article, the authors used a rich database that overcomes the problems encountered by other firm-level studies to shed some light on the employment generation of small firms in Spain and found that small firms contribute to employment disproportionately across all sectors of the economy.
Abstract: Despite the relevance in terms of policy, we still know little in Spain about where and by whom jobs are created, and how that is affecting the size distribution of firms. The main innovation of this paper is to use a rich database that overcomes the problems encountered by other firm-level studies to shed some light on the employment generation of small firms in Spain. We find that small firms contribute to employment disproportionately across all sectors of the economy although the difference between their employment and job creation share is largest in the manufacturing sector. The job creators in that sector are both new and established firms whereas only new small firms outperform their larger counterparts in the service sector. The large annual job creation of the small firm size class is shifting the firm size distribution towards the very small production units, although not uniformly across industries of different technology intensity.

37 citations

Journal Article•DOI•
Cyclical adjustment in fiscal rules: Some evidence on real-time bias for EU-15 countries

[...]

Gerhard Kempkes
01 Jun 2014-Finanzarchiv
TL;DR: This article analyzed real-time output gaps for EU-15 countries estimated by the EU (2002-2012), the IMF (2000---2012), and the OECD (1989---2012) and found a strong negative bias.
Abstract: Most EU member states adopt national fiscal rules that refer to cyclically adjusted borrowing limits. Yet, trend increases in public debt caused by the cyclical components are only prevented if the real-time output gaps used to calculate cyclical components balance over time. We analyze real-time output gaps for EU-15 countries estimated by the EU (2002---2012), the IMF (2000---2012), and the OECD (1989---2012) and find a strong negative bias. Simulations suggest that this bias may well translate into considerable debt-ratio hikes. Our findings imply that fiscal rules should incorporate ex post checks of the unbiasedness of cyclical components and a corresponding correction mechanism.

37 citations

"An Exploration of Real-Time Revisio..." refers background or result in this paper

  • ...This evidence is in line with that of Kempkes (2014), who claims that, as a result of the downward biases in real-time output gap estimates, structural balances are always over-estimated in real time....

    [...]

  • ...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....

    [...]

  • ...Therefore, the type of corrections to realtime estimates of the structural balance suggested by Kempkes (2014) should be contingent on the degree of slack in the economy....

    [...]

  • ...According to these results, while the over-estimation of structural balances advocated by Kempkes (2014) holds during expansions, it becomes an under-estimation during recessions....

    [...]

  • ...According to this pattern, while the over-estimation of structural balances advocated by Kempkes (2014) holds during expansions, it turns to under-estimation during recessions....

    [...]

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Frequently Asked Questions (9)
Q1. what are the main conclusions from this literature?

The main conclusions from this literature are: 1) output gap estimates are subject to signifi cant revisions in terms of magnitude; 2) the real-time output gaps have a negative bias (real-time output gaps are smaller on average than fi nal estimates); 3) the revisions of output gaps are higher at cyclical turning points; 4) data revisions do not play a major role in the revisions of output gaps; 5) revisions seem to be more related to projected actual GDP numbers than to potential GDP, and the former are related to macroeconomic projections. 

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). 

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. 

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. 

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. 

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. 

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. 

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. 

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.