Compared to its central role in policy discussions in the United States and most other developed countries, the reliability of the measurement of the output gap has attracted relatively little academic study. Furthermore, both the academic literature and the debate among practitioners have...

In order for time series estimates of the output gap to be useful to policy makers, this paper argues that two factors will be critical. First, they must be able to produce an estimate of the current output gap based only on past information. Put another way, to evaluate the performance of such...