• There’s plenty of evidence that output gaps are difficult to estimate, …
• especially in real time when they matter most for fiscal and monetary policy.
• IMF output gaps were -3.2 and -5.1 percent for the US and Euro zone in 2020.
• We use Phillips curves to compare these gap estimates to levels of core inflation.
• Depressed Euro zone core inflation points to an output gap closer to -8.0 percent, …
• while relatively robust core PCE inflation supports the narrower US gap estimate.