{"id":6020,"date":"2012-11-05T17:54:24","date_gmt":"2012-11-05T22:54:24","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=6020"},"modified":"2012-11-05T17:54:24","modified_gmt":"2012-11-05T22:54:24","slug":"the-output-gap-a-potentially-unreliable-measure-of-economic-health","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/","title":{"rendered":"The Output Gap: A \u201cPotentially\u201d Unreliable Measure of Economic Health?"},"content":{"rendered":"<p>Excerpt from a newsletter by Elise A. Marifian, Research Analyst at the St. Louis Fed, describing problems with calculation of the hypothetical output gap and how this can lead to incorrect monetary policy:<\/p>\n<blockquote>\n<p>Some economists question the reliability of potential output and, therefore, output gap measures. For instance, as James Bullard noted in 2009, if calculations had considered the housing boom and bust, then potential GDP and output gap measurements would have been smaller than they appeared&#8230;&#8230;.. Gavin (2012) shows that the output gap calculations for 2003-12 are reduced significantly when 2011 estimates of potential GDP are used in place of 2007 estimates. If our economy is improving faster than current output gap measurements suggest, then monetary policy intended to boost the economy could produce too much stimulation, thereby fueling inflation once the economy begins to pick up steam.<\/p>\n<\/blockquote>\n<p>via <a href='http:\/\/research.stlouisfed.org\/pageone-economics\/pages\/newsletter.php?nid=72'>Page One Economics &#8211; St. Louis Fed<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Excerpt from a newsletter by Elise A. Marifian, Research Analyst at the St. Louis Fed, describing problems with calculation of the hypothetical output gap and how this can lead to incorrect monetary policy: Some economists question the reliability of potential output and, therefore, output gap measures. For instance, as James Bullard noted in 2009, if &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;The Output Gap: A \u201cPotentially\u201d Unreliable Measure of Economic Health?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[5,34],"tags":[2346,2591],"class_list":["post-6020","post","type-post","status-publish","format-standard","hentry","category-economy","category-us-canada-countries-regions","tag-monetary-policy","tag-output-gap"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Output Gap: A \u201cPotentially\u201d Unreliable Measure of Economic Health? - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Output Gap: A \u201cPotentially\u201d Unreliable Measure of Economic Health? - the patient investor\" \/>\n<meta property=\"og:description\" content=\"Excerpt from a newsletter by Elise A. Marifian, Research Analyst at the St. Louis Fed, describing problems with calculation of the hypothetical output gap and how this can lead to incorrect monetary policy: Some economists question the reliability of potential output and, therefore, output gap measures. For instance, as James Bullard noted in 2009, if &hellip; Continue reading &quot;The Output Gap: A \u201cPotentially\u201d Unreliable Measure of Economic Health?&quot;\" \/>\n<meta property=\"og:url\" content=\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/\" \/>\n<meta property=\"og:site_name\" content=\"the patient investor\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/profile.php?id=61572934660810\" \/>\n<meta property=\"article:author\" content=\"https:\/\/facebook.com\/people\/The-Patient-Investor\/61572934660810\/\" \/>\n<meta property=\"article:published_time\" content=\"2012-11-05T22:54:24+00:00\" \/>\n<meta name=\"author\" content=\"Colin Twiggs\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Colin Twiggs\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/\"},\"author\":{\"name\":\"Colin Twiggs\",\"@id\":\"https:\/\/thepatientinvestor.com\/#\/schema\/person\/d42b18d516a80149d739845749ac6454\"},\"headline\":\"The Output Gap: A \u201cPotentially\u201d Unreliable Measure of Economic Health?\",\"datePublished\":\"2012-11-05T22:54:24+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/\"},\"wordCount\":153,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/thepatientinvestor.com\/#organization\"},\"keywords\":[\"Monetary Policy\",\"output gap\"],\"articleSection\":[\"Economy\",\"US &amp; Canada\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/\",\"url\":\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/\",\"name\":\"The Output Gap: A \u201cPotentially\u201d Unreliable Measure of Economic Health? - the patient investor\",\"isPartOf\":{\"@id\":\"https:\/\/thepatientinvestor.com\/#website\"},\"datePublished\":\"2012-11-05T22:54:24+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/05\/the-output-gap-a-potentially-unreliable-measure-of-economic-health\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/thepatientinvestor.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"The Output Gap: A \u201cPotentially\u201d Unreliable Measure of Economic Health?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/thepatientinvestor.com\/#website\",\"url\":\"https:\/\/thepatientinvestor.com\/\",\"name\":\"The Patient Investor\",\"description\":\"Smart. 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He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters. Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008\/2009 and 2020 bear markets well ahead of actual events. He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.\",\"sameAs\":[\"https:\/\/facebook.com\/people\/The-Patient-Investor\/61572934660810\/\",\"https:\/\/www.instagram.com\/colin_thepatientinvestor\",\"https:\/\/au.linkedin.com\/in\/colintwiggs\"],\"url\":\"https:\/\/thepatientinvestor.com\/index.php\/author\/investor\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"The Output Gap: A \u201cPotentially\u201d Unreliable Measure of Economic Health? - the patient investor","robots":{"index":"noindex","follow":"follow"},"og_locale":"en_US","og_type":"article","og_title":"The Output Gap: A \u201cPotentially\u201d Unreliable Measure of Economic Health? - the patient investor","og_description":"Excerpt from a newsletter by Elise A. Marifian, Research Analyst at the St. Louis Fed, describing problems with calculation of the hypothetical output gap and how this can lead to incorrect monetary policy: Some economists question the reliability of potential output and, therefore, output gap measures. 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The output gap is the difference between actual GDP and potential GDP at full capacity. A negative output gap is deflationary, while a positive output gap is inflationary, with aggregate demand growing at a faster\u2026","rel":"","context":"In &quot;GDP and Activity&quot;","block_context":{"text":"GDP and Activity","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/gdp-and-activity\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":24474,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/03\/11\/why-invest-in-gold-part-ii\/","url_meta":{"origin":6020,"position":1},"title":"Why invest in Gold? Part II","author":"Colin Twiggs","date":"March 11, 2021","format":false,"excerpt":"Yesterday we mentioned the Congressional Budget Office (CBO) projection that federal debt will grow to 202% of GDP by 2051. We should clarify that this is unlikely to happen. CBO projections are based on the growing gap between tax revenues and government spending, with deficits rising exponentially over time. The\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":26010,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/05\/27\/inflation-gdp-and-the-money-supply\/","url_meta":{"origin":6020,"position":2},"title":"Inflation, GDP and the money supply","author":"Colin Twiggs","date":"May 27, 2021","format":false,"excerpt":"I receive plenty of advice in my inbox along the lines of \"Inflation hasn't been a problem for more than twenty years. Nothing has changed. Price spikes are transitory. This is stale news. Nothing to see here. Move along now.....\" I keep coming back to this chart, which shows the\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":9490,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/03\/14\/redistribution-boosts-consumption-not-output-richmond-fed\/","url_meta":{"origin":6020,"position":3},"title":"Redistribution boosts consumption, not output | Richmond Fed","author":"ColinTwiggs","date":"March 14, 2014","format":false,"excerpt":"Abstract from a February 28, 2014 paper by Kartik Athreya, Andrew Owens, and Felipe Schwartzman: The aftermath of the recent recession has seen numerous calls to use transfers to poorer households as a means to enhance aggregate activity. We show that the key to understanding the direction and size of\u2026","rel":"","context":"In &quot;Economy&quot;","block_context":{"text":"Economy","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5014,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/07\/31\/no-end-to-long-term-unemployment-business-insider\/","url_meta":{"origin":6020,"position":4},"title":"No End To Long-Term Unemployment &#8211; Business Insider","author":"Colin Twiggs","date":"July 31, 2012","format":false,"excerpt":"J BRADFORD DE LONG, professor of economics at University of California at Berkeley, argues for expansionary monetary and fiscal policy. At its nadir in the winter of 1933, the Great Depression was a form of collective insanity. Workers were idle because firms would not hire them; firms would not hire\u2026","rel":"","context":"In &quot;Economy&quot;","block_context":{"text":"Economy","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5952,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/10\/31\/should-the-fed-be-targeting-inflation\/","url_meta":{"origin":6020,"position":5},"title":"Why the Fed should not target inflation","author":"Colin Twiggs","date":"October 31, 2012","format":false,"excerpt":"Scott Sumner, Professor of Economics at Bentley University, proposes that the Fed target nominal growth in GDP (\"NGDP\") rather than inflation as Ben Bernanke has long advocated: \"Even he [Bernanke] must be surprised and disappointed with how poorly [inflation targeting] worked during the recent crisis.\" The primary problem, Sumner points\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/6020","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=6020"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/6020\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=6020"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=6020"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=6020"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}