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Measures of slack in the euro area

Author

Listed:
  • Szörfi, Béla
  • Tóth, Máté

Abstract

This box aims to illustrate the difficulties in measuring slack in the euro area economy and the high uncertainty surrounding the estimates. A model-based estimate illustrates the point by suggesting an output gap that is close to zero, although surrounded by a high degree of uncertainty. Recent labour supply shocks are likely to be supporting the growth of both potential and actual output. The broad measure of labour underutilisation suggests that slack was larger during the financial crisis and over the recovery than indicated by the headline unemployment rate. JEL Classification: E22, E23, E32, J20, J64

Suggested Citation

  • Szörfi, Béla & Tóth, Máté, 2018. "Measures of slack in the euro area," Economic Bulletin Boxes, European Central Bank, vol. 3.
    • Handle: RePEc:ecb:ecbbox:2018:0003:3
    Note: 2322646
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    File URL: https://www.ecb.europa.eu//pub/pdf/other/ecb.ebbox201803_03.en.pdf
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    Citations

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    Cited by:

    1. Fabian Eser & Peter Karadi & Philip R. Lane & Laura Moretti & Chiara Osbat, 2020. "The Phillips Curve at the ECB," Manchester School, University of Manchester, vol. 88(S1), pages 50-85, September.
    2. Consolo, Agostino & Da Silva, António Dias, 2019. "The euro area labour market through the lens of the Beveridge curve," Economic Bulletin Articles, European Central Bank, vol. 4.

    More about this item

    Keywords

    cyclical unemployment; potential output;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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