output gap

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Output Gap

The difference between an economy's GDP and its potential GDP. That is, the output gap measures GDP against what the GDP ought to be if the economy were using its resources efficiently. A positive output gap occurs when the GDP exceeds the efficient GDP, usually through the over-utilization of resources, while a negative output gap occurs when the GDP undershoots the potential GDP. Most analysts believe that a positive output gap leads to inflation.

output gap

see DEFLATIONARY GAP.

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References in periodicals archive ?

The main indicator of current state of the economy is the output gap; positive values of the output gap reflect boom in economic activity while negative values portray recession.

The Unreliability of Output-Gap Estimates in Real Time

0] are the optimal inflation rate and output gap, respectively.

Comment by Laurence Ball

t+1] and the forecast for the output gap in the next quarter, output [gap.

Federal funds rates based on seven simple monetary policy rules

On the other hand, Nobay and Peel (2003) find deflation bias in output gap and do not find any significant signs of inflation bias while deriving optimal monetary policy reaction function.

CHOICE OF FUNCTIONAL FORM IN THE NONLINEAR TAYLOR RULE - The Case of Pakistan

The variables used in this study are real money demand (M1) and real money supply (M1), nominal interest rate, real GDP, exchange rate (PAK/USD), inflation gap and output gap.

THREE STAGE -LEAST SQUARE ESTIMATES OF NARROW MONEY DEMAND and MONEY SUPPLY IN PAKISTAN

The output gap is an obvious candidate to explain cyclically unadjusted surpluses.

Common fluctuations in OECD budget balances

The resulting indicators may be interpreted, in an economic sense, as metrics of sustainable (ie not associated with the build-up of imbalances) output and the output gap.

Estimating sustainable output growth in emerging market economies

where PR is an "interest-rate smoothing" parameter (0 < [rho]R < 1), representing the gradual response of interest rates to inflation and the output gap.

The Taylor principle in the long run: an empirical perspective

The output gap based on Doh's measure implies the economy was operating well above its potential level in 2007, the year before the financial crisis, and had less spare capacity at the end of 2013 than the CBO measure implies.

Accounting for changes in the U.S. budget deficit

If the FOMC's assurances that rates will remain low raise private individuals' expectations for future inflation and growth, then they will wish to consume more today, thereby lifting current aggregate demand and closing the output gap (the gap between actual and potential economic output).

Odyssean forward guidance in monetary policy: a primer

Here is a sampling of OECD projections on how the economies of member countries will do next year, as measured by output gap -- which is the difference between an economy's actual GDP and its potential GDP -- according to the (http://www.

GDP Gap: With Germany The Most Efficient Economy, How Will These Other OECD Economies Fare In 2014?

Despite the small pick-up in economic activity in Romania, especially on the production side of the economy, the central bank expects the large negative output gap to persist, and to even deepen to below -3% by year-end, before recovering to around -2.