02063cas a2200253 a 4500 AALejournalIMF001803 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451874457 1018-5941 BD-DhAAL BD-DhAAL Ubide, Angel. Mind the Gap : What is the Best Measure of Slack in the Euro Area? / Angel Ubide, Kevin Ross. Washington, D.C. : International Monetary Fund, 2001. 1 online resource (36 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Assessing the magnitude of the output gap is critical to achieving an optimal policy mix. Unfortunately, the gap is an unobservable variable, which, in practice, has been estimated in a variety of ways, depending on the preferences of the modeler. This model selection problem leads to a substantial degree of uncertainty regarding the magnitude of the output gap, which can reduce its usefulness as a policy tool. To overcome this problem, in this paper we attempt to insert some discipline into this search by providing two metrics-inflation forecasting and business cycle dating-against which different options can be evaluated using aggregated euro-area GDP data. Our results suggest that Gali, Gertler, and Lopez-Salido's (2001) inefficiency wedge performs best in inflation forecasting and production function methodology dominates in the prediction of turning points. If, however, a unique methodology must be selected, the quadratic trend delivers the best overall results. Mode of access: Internet Ross, Kevin. IMF Working Papers; Working Paper ; No. 2001/203 Full text available on IMF http://elibrary.imf.org/view/journals/001/2001/203/001.2001.issue-203-en.xml IMF e-Library