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Jelle Barkema, Tryggvi Gudmundsson, and Mr. Mico Mrkaic
Estimates of output gaps continue to play a key role in assessments of the stance of business cycles. This paper uses three approaches to examine the historical record of output gap measurements and their use in surveillance within the IMF. Firstly, the historical record of global output gap estimates shows a firm negative skew, in line with previous regional studies, as well as frequent historical revisions to output gap estimates. Secondly, when looking at the co-movement of output gap estimates and realized measures of slack, a positive, but limited, association is found between the two. Thirdly, text analysis techniques are deployed to assess how estimates of output gaps are used in Fund surveillance. The results reveal no strong bearing of output gap estimates on the coverage of the concept or direction of policy advice. The results suggest the need for continued caution in relying on output gaps for real-time policymaking and policy assessment.
International Monetary Fund. European Dept.

output as a permanent increase in the potential output. In this case, common filters will underestimate output gap in upturns and overestimate output gap in downturns. 4. This study examines immigration patterns in Norway and estimates potential output using various methodologies . In particular, it applies a new methodology proposed by Borio and others (2013) to estimate potential output by drawing on information about immigration and oil price movements. The next section provides an overview of the recent trend in immigration in Norway. Section C discusses

Jelle Barkema, Tryggvi Gudmundsson, and Mr. Mico Mrkaic

most common conceptual framework for slack is that of the output gap, which relates an economy’s potential output, on the one hand, to its actual output, on the other, and is defined as the difference between the two. A positive gap represents an overheating economy, whereby resource utilization is above its steady state feasibility, whereas a negative gap signifies underused resources. To the extent that the output gap is used as an indicator of slack, it plays a crucial role in guiding the optimal policy path at any point in time. An underestimated output gap

International Monetary Fund

increased during the crisis, this increase was smaller than what would have been expected given the size of the output decline. As a result, the fall in productivity during this recession was larger than that experienced during previous recessions. This drop in productivity could be evidence of unusually high labor hoarding by firms, implying that there is “hidden underemployment” within firms that is not being captured by the unemployment rate. This underestimate of true unemployment could result in an underestimated output gap using Okun’s law. On the other hand

International Monetary Fund. European Dept.
This Selected Issues paper examines migration patterns in Norway and their implications for estimates of potential output. It applies a new methodology proposed by Borio and others (2013) to estimate potential output by drawing on information about immigration and oil price movements. The paper also provides an overview of the recent trend in immigration in Norway and discusses various estimates of potential output using standard approaches. The results indicate that immigration plays a small but statistically significant role in the estimation of potential output for Norway. The data show that immigration inflows into Norway vary across source countries. The largest share of immigrants is from Poland, accounting for 15 percent of the total in 2012. Immigration patterns in Norway contain both cyclical and structural elements, but the latter seems dominant at least for now. Empirical results also suggest that immigration plays some role in determining potential output, however, its impact is quite small, consistent with the view that the recent immigration patterns are structural.
International Monetary Fund
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.