The global output gap: measurement issues and regional disparities

BIS Quarterly Review  |  June 2011  | 
06 June 2011

The global output gap seems to be negative but closing. According to structural estimates, the gap is still wide, particularly in the advanced economies. However, these measures may overestimate potential output, eg by not accounting for the fact that certain investments may have turned out to be unproductive. Purely statistical estimates, on the other hand, suggest that the global output gap has already closed in both the advanced and the emerging market economies, but statistical measures are subject to an end-point problem that too often makes them signal a closed gap at the current edge.

JEL classification: E32