A0237
Title: Measuring the Euro area output gap
Authors: Matteo Luciani - Federal Reserve Board (United States) [presenting]
Matteo Barigozzi - University of Bologna (Italy)
Claudio Lissona - University of Bologna (Italy)
Abstract: The Euro area output gap and potential output are measured using a non-stationary dynamic factor model estimated on a large dataset of macroeconomic and financial variables. It is found that after the 2008 global financial crisis, potential output growth slowed, and, as of the end of 2023, it has yet to return to its pre-2008 pace. As a result, it is estimated that from 2012 to 2023, the economy was tighter than estimated by the European Commission and the IMF. Moreover, credit indicators are crucial for capturing the business cycle's medium-term fluctuations, thus confirming that the business and financial cycles are correlated and co-move in the medium run.
