Revisions to output gap estimates can skew fiscal stabilisers, IMF says

Study finds potential GDP estimates in the EU are often revised significantly


Revisions to estimates of the output gap in European Union countries have historically averaged almost 1.5% of potential GDP – contributing significantly to revisions in the estimated cyclically-adjusted primary balance, a measure of fiscal effort.

In Structural Balance Targeting and Output Gap Uncertainty, IMF economists Eugen Tereanu, Anita Tuladhar and Alejandro Simone write that this means the standard advice of "letting automatic stabilizers operate fully" in response to a positive or

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