STATISTICAL MEASURES OF THE OUTPUT GAP DISTRIBUTION AMONG EUROPEAN COUNTRIES IN THE YEARS 2000–2019

Abstract

Background and Objective: The concept of full capacity utilisation is central in macroeconomic theory and economic policy. One of the most employed variables is the output gap, which shows the gap between real and potential production. The aim of the paper is a statistical analysis of the output gap for 27 European countries in the years 2000–2019, and to investigate the distribution of the output gap.

Study Design/Materials and Methods: Annual output gap data (AMECO database) are analysed for 27 European countries during the period 2000–2019 (540 observations). Statistical measures such as mean, median, standard deviation, kurtosis and skewness are used.

Results: A statistical analysis of the whole sample reveals an almost symmetrical distribution of the output gap for the analysed countries and period. Investigation of particular country cases indicates a more complex picture.

Practical implications: Results suggest that the output gap, which is partially the outcome of economic policies conducted by fiscal and monetary authorities, occurs with almost equal frequency below and above full capacity utilisation.

Conclusion and summary: Output gaps in European countries occur with almost equal frequency, but the situation among countries and periods is more complex. Some waves of business cycles when output gaps in most of the analysed countries change simultaneously are also indicated.