Monday, January 8, 2018

January always brings discussion of key themes for the year ahead. A key theme should be a fundamental re-examination of the output gap. Oddly enough, output gaps across major economies are highly correlated, even as real GDP levels have diverged meaningfully over the past decade. The underlying issue is that it is difficult to measure potential GDP properly. Measurement error is giving rise to Frivolously Related Output Gaps (FROGs). As monetary stimulus is withdrawn, FROGs have profound policy implications.

IIF Authors

Robin Brooks

Robin
Brooks
Managing Director and Chief Economist
@RobinBrooksIIF
rbrooks@iif.com

Jonathan Fortun

Jonathan
Fortun
Associate Economist
@econchart
jfortun@iif.com

Gregory Basile

Gregory
Basile
Senior Research Analyst
@GregBasileIIF
gbasile@iif.com

Tariq Khan

Tariq
Khan
Research Analyst
+1 202 857 3339
tkhan@iif.com

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