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The Survey-Based Output Gap and Input Gap

Author

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  • Koichiro Kamada

    (Faculty of Business and Commerce, Keio University)

Abstract

This paper proposes two measures on economic slackness, the survey-based output gap and the survey-based input gap. Our method extends Carlson and Parkin’s (1975) method of transforming qualitative data into quantitative data and uses Hirose and Kamada’s (2003) method of estimating a time-varying model. We show theoretically how a survey asking firms whether business conditions are favorable or unfavorable generates an estimate of the output gap in a country. Our method is also applicable to the estimation of the capital input gap and the labor input gap, which are combined to produce the survey-based input gap in a country. The Japanese survey-based output gap and input gap are estimated, based on the TANKAN survey conducted by the Bank of Japan. The estimated gap measures are consistent with the official reference dates of business cycle and have tight confidence intervals. The two measures surprisingly coincide with each other, but sometimes deviate from each other, particularly in severe recessions. The deviation is likely to be caused by changes in total factor productivity.

Suggested Citation

  • Koichiro Kamada, 2026. "The Survey-Based Output Gap and Input Gap," Keio-IES Discussion Paper Series DP2026-004, Institute for Economics Studies, Keio University.
    • Handle: RePEc:keo:dpaper:dp2026-004
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    References listed on IDEAS

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    1. Naoko Hara & Naohisa Hirakata & Yusuke Inomata & Satoshi Ito & Takuji Kawamoto & Takushi Kurozumi & Makoto Minegishi & Izumi Takagawa, 2006. "The New Estimates of Output Gap and Potential Growth Rate," Bank of Japan Review Series 06-E-3, Bank of Japan.
    2. Kamada, Koichiro & Masuda, Kazuto, 2001. "Effects of Measurement Error on the Output Gap in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(2), pages 109-154, May.
    3. Hirose, Yasuo & Kamada, Koichiro, 2003. "A New Technique for Simultaneous Estimation of Potential Output and the Phillips Curve," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(2), pages 93-112, August.
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    Keywords

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    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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