Profile picture
Robin Brooks @RobinBrooksIIF
, 3 tweets, 2 min read Read on Twitter
I got lots of questions on my earlier post about output gap estimates that are suspect. So here's a bit more detail. Chart shows real GDP levels for the US, the Euro zone, and key Euro periphery countries. Real GDP levels have diverged massively since 2008.
Even though real GDP levels have diverged so much, IMF output gap estimates are very correlated across countries. Italy's GDP is 5% below 2008, but it has an output gap of 0.5%. Portugal's GDP is flat since 2008, but it has an output gap of zero. How are these estimates possible?
They're possible if estimates for potential GDP "bend down" to meet actual GDP, when it fails to rise quickly. But this "bending down" doesn't reflect true slack or underutilized resources. It's more about rationalizing the "status quo" and, perhaps, too tight monetary policy.
Missing some Tweet in this thread?
You can try to force a refresh.

Like this thread? Get email updates or save it to PDF!

Subscribe to Robin Brooks
Profile picture

Get real-time email alerts when new unrolls are available from this author!

This content may be removed anytime!

Twitter may remove this content at anytime, convert it as a PDF, save and print for later use!

Try unrolling a thread yourself!

how to unroll video

1) Follow Thread Reader App on Twitter so you can easily mention us!

2) Go to a Twitter thread (series of Tweets by the same owner) and mention us with a keyword "unroll" @threadreaderapp unroll

You can practice here first or read more on our help page!

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just three indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member and get exclusive features!

Premium member ($30.00/year)

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!