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The Production Function Methodology for Calculating Potential Growth Rates & Output Gaps

Author(s): Karel Havik, Kieran Mc Morrow, Fabrice Orlandi, Christophe Planas, Rafal Raciborski, Werner Roeger, Alessandro Rossi, Anna Thum-Thysen, Valerie Vandermeulen

The Production Function Methodology for Calculating Potential Growth Rates & Output Gapspdf(3 MB) Choose translations of the previous link 

Summary for non-specialistspdf(24 kB) Choose translations of the previous link 

This paper provides a detailed description of the current version of the Ecofin Council approved production function (PF) methodology which is used for assessing both the productive capacity (i.e. potential output) and cyclical position (i.e. output gaps) of EU economies. Compared with the previous 2010 paper on the same topic, there have been two significant changes to the PF methodology, namely an overhaul of the NAWRU methodology & the introduction of a new T+10 methodology.


(European Economy. Economic Papers 535. November 2014. Brussels. PDF. 120pp. Tab. Graph. Ann. Bibliogr. Free.)

KC-AI-14-535-EN-N (online)KC-AI-14-535-EN-C (print)
ISBN 978-92-79-35184-6 (online)ISBN 978-92-79-36150-0 (print)
doi: 10.2765/71437 (online)doi: 10.2765/81203 (print)

JEL classification: C10, E60, O10

Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.

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