My starting point to characterizing the nature of monetary policy across countries is the standard Taylor rule (1993), which specifies a link among nominal interest rates, inflation, and the output gap
. While an increasing number of countries use the nominal interest rate as their preferred instrument for the conduct of monetary policy combined with some sort of inflation and/or output-related targets, the approach I take here is more broad.
It is often highlighted that Lebanon suffers from a productivity gap or an underutilization of resources or, better still, an output gap
. Though this is no doubt true, there is not any estimate of this opportunity gap.
The second equation represents the Phillips supply curve (PC) linking inflation rate to its expected future value, the output gap
and a supply shock [[epsilon].sub.s] which represents an unexpected change to production.
An output gap
suggests that an economy is running at an inefficient rate-either overworking or underworking its resources.
The main indicator of current state of the economy is the output gap
; positive values of the output gap
reflect boom in economic activity while negative values portray recession.
The output gap
[x.sub.t] and the inflation rate [[pi].sub.t] in period t are the endogenous variables of the systems (1), (2).
We find that monetary authority in Pakistan does not follow Taylor rule as coefficient of output gap
is negative and statistically insignificant and the coefficient of inflation rate, though statistically significant, is far below the benchmark value suggested by Taylor (1993).
An output gap
of-2.2 is a modest downturn in the economy.
The aim of the paper is to analyze the preferences of the Polish central bank, concerning inflation and output gap
stabilization and verification, and whether these preferences changed after the beginning of the global financial crisis.
In this article, I evaluate the challenges related to the European Commission's output gap
method of calculating the structural budgetary position, and assess its bottom-up alternatives in the EU's fiscal framework using the Finnish data for the years 1984-2014.
Commonly, activity is measured using the output gap
(the percentage difference between actual output and potential output) or the negative of the unemployment gap (the percentage point difference between the unemployment rate and the natural rate of unemployment).