The Information Content of Capacity Utilisation Rates for Output Gap Estimates
AbstractFrom a theoretical perspective, the output gap is probably the most comprehensive and convincing concept to describe the cyclical position of an economy. Unfortunately, for practical purposes, the concept depends on the determination of potential output, which is an inherently unobservable variable. In this paper, we examine whether the real-time estimates of the output gap as published by the OECD can be improved by referring to measures of physical capital capacity utilisation from business tendency surveys. These data relate directly to the stress on the current capacity to produce goods and services and are not revised. Our real-time panel data set comprises 22 countries at an annual frequency with data vintages from 1995 to 2009. We show that the real-time output gaps are informationally inefficient in the sense that survey data available in real time can help produce estimates that are significantly closer to later releases of output gap estimates.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3276.
Date of creation: 2010
Date of revision:
output gap; capacity utilisation; real-time analysis; survey data;
Other versions of this item:
- Michael Graff & Jan-Egbert Sturm, 2010. "The Information Content of Capacity Utilization Rates for Output Gap Estimates," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 10-269, KOF Swiss Economic Institute, ETH Zurich.
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
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