The information content of capacity utilisation rates for output gap estimates

Michael Graff and Jan-Egbert Sturm

No 10-269, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: From a theoretical perspective, the output gap is probably the most comprehensive and convincing concept to describe the cyclical position of an economy. Unfortunately, for practical purposes, the concept depends on the determination of potential output, which is an inherently unobservable variable. In this paper, we examine whether the real-time estimates of the output gap as published by the OECD can be improved by referring to measures of physical capital capacity utilisation from business tendency surveys. These data relate directly to the stress on the current capacity to produce goods and services and are not revised. Our real-time panel data set comprises 22 countries at an annual frequency with data vintages from 1995 to 2009. We show that the real-time output gaps are informationally inefficient in the sense that survey data available in real time can help produce estimates that are significantly closer to later releases of output gap estimates.

Keywords: Output gap; Capacity utilisation; Real-time analysis; Survey data (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010-11
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (11)

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http://dx.doi.org/10.3929/ethz-a-010703548 (application/pdf)

Related works:
Working Paper: The Information Content of Capacity Utilisation Rates for Output Gap Estimates (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:kof:wpskof:10-269

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