The difference between actual output in an economic area and that at full capacity (productive capacity), and thus an indicator of unused capacity overall. Central banks use this indicator to predict speculative bubbles. – However, past experience has shown that, because of the difficulty of recording it – the output gap is not directly observable: it has to be widely estimated – statistical corrections to the output gap that have subsequently become necessary are very strong, and sometimes even the sign has changed. – See instructions, monetary policy, capacity utilization rate, data uncertainty, capacity utilization, business cycle diagnostics, order capacity index, potential growth, output constraints, Say’s law, stagnation, secular, two-pillar principle. – Cf. ECB Monthly Bulletin of February 2005, pp. 45 et seq. (coverage difficulties, statistical), ECB Monthly Bulletin of December 2008, pp. 74 et seq. (development of potential output in the face of changing oil prices; important methodological findings), ECB Monthly Bulletin of July 2009, p. 53 (output gap difficult to calculate), ECB Monthly Bulletin of January 2011, pp. 87 et seq. (output gap and inflation; overview; references), ECB Monthly Bulletin of June 2011, p. 78 ff. (output gap since 1995; overviews), ECB Monthly Bulletin of November 2011, p. 55 ff. (new estimates; informative value of the output gap for forecasting inflation; references), Deutsche Bundesbank Monthly Bulletin of April 2014, p. 13 ff. (in-depth discussion of problems related to the measurement and interpretation of the output gap).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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