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Measures of the Output Gap in the Euro-Zone: An Empirical Assessment of Selected Methods

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  • Odile Chagny
  • Jörg Döpke
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    Abstract

    The paper discusses some widely used methods for estimating output gaps based on aggregated data for the eurozone. Though these methods exhibit some common features, an empirical comparison demonstrates that the various techniques differ substantially. In particular, the correlation of output gaps calculated with different methods is generally low, the methods imply different turning points, and the estimated level of the output gap differs greatly. Moreover, tests suggest that some of the methods commonly used have only limited information content for inflation forecasting in the euro-zone. Conclusions for business cycle analysis and economic policy are offered. Der Aufsatz untersucht einige populäre Methoden zur Messung des Output Gaps auf der Basis von aggregierten Daten für die Euro-Zone. Obwohl die Methoden einige wichtige gemeinsame Eigenschaften aufweisen, zeigen sie auch erhebliche Unterschiede; insbesondere ist die Korrelation zwischen Output-Gap-Schätzungen auf Basis verschiedener Methoden niedrig, die Ansätze implizieren differierende Wendepunkte und das Niveau des Output Gaps variiert stark. Empirische Untersuchungen zeigen zudem, dass der Informationsgehalt der Gap-Variablen für die Prognose der Inflationsrate nur sehr klein ist. Einige Schlussfolgerungen hinsichtlich der Nützlichkeit von Output-Gap-Schätzungen und für die Wirtschaftspolitik werden gezogen.

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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1053.

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    Length: 38 pages
    Date of creation: Jun 2001
    Date of revision:
    Handle: RePEc:kie:kieliw:1053

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    Related research

    Keywords: Output Gap; European Monetary Union; Business Cycles;

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    References

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    Cited by:
    1. Tsasa Vangu, Jean-Paul Kimbambu, 2014. "Diagnostic de la politique monétaire en Rép. Dém. Congo – Approche par l’Equilibre Général Dynamique Stochastique," Dynare Working Papers 38, CEPREMAP.
    2. Chetouane, Mabrouk & Lemoine, Matthieu & De la Serve, Marie-Elisabeth, 2011. "Impact de la crise sur la croissance potentielle. Une approche par les modèles à composantes inobservables," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/6706, Paris Dauphine University.
    3. Jan-Egbert Sturm & Michael Graff, 2009. "Schätzung der Outputlücke," KOF Analysen, KOF Swiss Economic Institute, ETH Zurich, KOF Swiss Economic Institute, ETH Zurich, vol. 3(2), pages 55-67, June.
    4. Ansgar Belke & Jens Klose, 2009. "Does the ECB Rely on a Taylor Rule? - Comparing Ex-post with Real Time Data," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0133, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    5. Treu, Johannes, 2010. "Der Taylor-Zins und die europäische Geldpolitik 1999 - 2009," Wirtschaftswissenschaftliche Diskussionspapiere, Ernst Moritz Arndt University of Greifswald, Faculty of Law and Economics 03/2010, Ernst Moritz Arndt University of Greifswald, Faculty of Law and Economics.
    6. Grech, Aaron George, 2004. "Estimating the output gap for the Maltese economy," MPRA Paper 33663, University Library of Munich, Germany.
    7. Lemoine, M. & de la Serve, M.E. & Chetouane, M., 2011. "Impact of the crisis on potential growth: An approach based on unobserved component models (in french)," Working papers, Banque de France 331, Banque de France.
    8. Y. Adema, 2003. "A taylor rule for the euro area based on quasi-real time data," WO Research Memoranda (discontinued), Netherlands Central Bank, Research Department 738, Netherlands Central Bank, Research Department.
    9. Adolfo Cobo, 2005. "Output Gap In Colombia: An Eclectic Approach," BORRADORES DE ECONOMIA, BANCO DE LA REPÚBLICA 003310, BANCO DE LA REPÚBLICA.
    10. Gradzewicz, Michal & Kolasa, Marcin, 2004. "Estimating the output gap in the Polish economy: the VECM approach," MPRA Paper 28227, University Library of Munich, Germany.
    11. Sra Chuenchoksan & Don Nakornthab & Surach Tanboon, 2008. "Uncertainty in the Estimation of Potential Output and Implications for the Conduct of Monetary Policy," Working Papers, Economic Research Department, Bank of Thailand 2008-04, Economic Research Department, Bank of Thailand.
    12. Karl Heinrich Oppenländer, 2004. "New Approaches in Business Cycle Research: The Application of Business Cycle Indicators," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 224(1-2), pages 152-165, February.
    13. Kappler, Marcus, 2007. "Projecting the Medium-Term: Outcomes and Errors for GDP Growth," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 07-068, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    14. Adolfo L.Cobo, . "Output Gap in Colombia: An Eclectic Approach," Borradores de Economia 327, Banco de la Republica de Colombia.

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