Estimates of Canada's potential GDP and output gap : Estimations du PIB potentiel et de l'écart de production du Canada : une analyse comparative

This note briefly reviews the usefulness of the concepts of potential GDP and the output gap (GDP relative to potential GDP), which figure prominently in the conduct of both monetary and fiscal policy. [...] The importance of providing estimates of the structural budget balance is underscored in the United Kingdom, where, under the Code for fiscal stability the government is required to publish estimates of fiscal aggregates adjusted for the economic cycle. [...] The comparison of potential GDP and output gap estimates shows that: Despite some differences in the level of the output gap at certain points in time, the output gap estimates across organizations are highly correlated; The output gap estimates show different views regarding the Canadian economy’s relative strength heading into the recession: - at the upper end, the Bank of Canada estimates a [...] The following provides a brief review of given their role in the conduct of monetary and the usefulness of the concepts of potential GDP fiscal policy, it is useful to compare estimates and the output gap, as well as a comparison of produced by different organizations. [...] The estimate of potential GDP Masi (1997) notes that the concepts of potential therefore figures prominently in calculating the GDP and output gaps “are central to the IMF’s structural balance since it is used to identify the analytical work in providing policy cyclical revenue and expenditure components of recommendations to member governments.” the budget.