IMF paper attempts to pin down output gap
Output gap in US was at its lowest in second quarter of 2009
Researchers at the International Monetary Fund (IMF) seek to improve output gap estimates in the United States, by incorporating financial frictions in their models, in a working paper published last week.
In Output Gap in Presence of Financial Frictions and Monetary Policy Trade-offs, Francesco Furlanetto, Paolo Gelain and Marzie Taheri Sanjani study how financial frictions affect "the frontier of the US economy".
The authors say potential output and the output gap are "crucial" considerations
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