GDP Gap

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GDP Gap

The economic growth that an economy would experience if all persons willing to work had jobs. The GDP gap represents growth that can never happen because the economy has not allocated jobs to all willing workers. This can occur for a number of reasons, including excessive government regulation and corporate fear for future earnings. See also: Unemployment rate, Full employment.
References in periodicals archive ?
Cohesion policy already has a lot of objectives, such as reducing GDP gaps and, for the future, differences in the quality of life.
monetary policy clearly affects the GDP gaps of its major trading partners.
The study reflects the global nature of monetary policy by modeling an aggregate short-term interest rate as a function of measures of worldwide inflation and the GDP gap.
The "Taylor Rule" presents the Federal funds rate as a simple linear function of the inflation rate and the GDP gap [Taylor, 1993].
The study presented here reflects the global nature of monetary policy by modeling an aggregate short-term interest rate as a function of measures of worldwide inflation and the GDP gap.
where r = the short-term nominal interest rate; [pi]* = the inflation rate (percentage change in the price level); y = the GDP gap = 100 ln(real GDP / trend real GDP); [pi]* = target inflation rate; [r.
Note that Taylor used contemporaneous values of inflation and the GDP gap.
Once again, however, the stable sample means obscure considerable annual volatility in the GDP gaps and the various contributing factors.
Equation (12) can then be rearranged as in (3) to give a decomposition of the GDP gap.
Hence, we use the method proposed in section 2, and the formula in equation (12), to decompose the GDP gap into various contributing factors.
Column 5 contains annual estimates of the contribution to the nominal (and real) GDP gap of deviations of total-factor productivity [R.
For example, the real GDP gap for 1986 indicates that real output was above its long-run trend.