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

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  • Döpke, Jörg
  • Chagny, Odile

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.

Suggested Citation

  • Döpke, Jörg & Chagny, Odile, 2001. "Measures of the Output Gap in the Euro-Zone: An Empirical Assessment of Selected Methods," Kiel Working Papers 1053, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkwp:1053
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    More about this item

    Keywords

    Output Gap; European Monetary Union; Business Cycles;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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