Measures of slack in the euro area

Béla Szörfi and Mate Toth

Economic Bulletin Boxes, 2018, vol. 3

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

Keywords: cyclical unemployment; potential output (search for similar items in EconPapers)
Date: 2018-05
Note: 2322646
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbbox:2018:0003:3

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