Status: Draft -- Not PublishedWill be live at 02/04/2021 07:20
Global Macro Views: Output Gaps for Italy and Spain
- The COVID-19 shock means that GDP is below potential almost everywhere.
- But there is big uncertainty how to estimate the output gap, especially in real time.
- We last week updated our inflation-consistent output gaps for the US and Euro zone, …
- using the Phillips curve to compare IMF output gap estimates to the level of core inflation.
- The robust level of core PCE inflation validated the IMF’s relatively modest gap for the US, …
- while low Q4 core HICP inflation points to more Euro zone slack than IMF estimates suggest.
- This Global Macro Views extends our inflation-consistent gap estimates to Italy and Spain.
- We find evidence of substantial slack in Italy, while Spain is in line with IMF gap estimates.
- There is a large degree of uncertainty around our numbers, as with any gap estimate.