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The Output Gap and the Potential Growth Rate:Issues and Applications as an Indicator for the Pressure on Price Change

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  • Research and Statistics Department

    (Bank of Japan)

Abstract

There are a number of factors driving price movements. It would be fair to say, however, that one of the fundamentally decisive factors is the extent to which aggregate supply capacity is actually met by aggregate demand. The difference between aggregate supply capacity and aggregate demand is generally known as the output gap, and it is widely used by international institutions and central banks in many countries all over the world when analyzing economic conditions, as one of the fundamental indicators for evaluating the pressure for price change. Indeed, the output gap underlies the description of future price movements in the Outlook and Risk Assessment of the Economy and Prices, published by the Bank of Japan biannually.

Suggested Citation

  • Research and Statistics Department, 2003. "The Output Gap and the Potential Growth Rate:Issues and Applications as an Indicator for the Pressure on Price Change," Bank of Japan Research Papers 2003-05-09, Bank of Japan.
    • Handle: RePEc:boj:bojron:03-e-0509
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    Cited by:

    1. Kamada, Koichiro, 2005. "Real-time estimation of the output gap in Japan and its usefulness for inflation forecasting and policymaking," The North American Journal of Economics and Finance, Elsevier, vol. 16(3), pages 309-332, December.
    2. Nakakuki, Masayuki & Otani, Akira & Shiratsuka, Shigenori, 2004. "Distortions in Factor Markets and Structural Adjustments in the Economy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 22(2), pages 71-99, May.

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