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

Jörg Döpke and Odile Chagny

No 1053, Kiel Working Papers from Kiel Institute for the World Economy (IfW)

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.

Keywords: Output Gap; European Monetary Union; Business Cycles (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2001
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