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Minding the Output Gap: What Is Potential GDP and Why Does It Matter?
Potential output is an estimate of what the economy could produce. Actual output is what the economy does produce. If actual is below potential -- a negative output gap -- there is "slack" in the economy. If actual is above potential -- a positive output gap -- resources are fully employed, or perhaps overutilized. This issue of Page One Economics explains how the output gap is useful for checking the health of the economy. It also points out how errors in the estimation of potential real GDP can reduce the effectiveness of policy.
Journal Article
Real GDP in annual revisions to the U.S. National accounts: 1966-2011
On July 29, 2011, the U.S. Bureau of Economic Analysis (BEA) released a flexible annual revision to the U.S. national income and product accounts. Real GDP growth was subject to large downward revisions. I use the Philadelphia Fed's real-time data set to compare the size of the recent revision with that of past annual revisions since 1966.
Journal Article
A Growth-Accounting Perspective on the Post-Pandemic Economy
Real GDP has increased at a 2.8% annual rate over the past four quarters, much faster than the 2009-20 expansionary period.
Newsletter
Data Units in FRED®
This Page One Economics Data Primer describes the range of data units available in FRED, including their common use and interpretation, that help reveal the story behind the numbers.
Working Paper
The Role of Oil Price Shocks in Causing U.S. Recessions
Although oil price shocks have long been viewed as one of the leading candidates for explaining U.S. recessions, surprisingly little is known about the extent to which oil price shocks explain recessions. We provide a formal analysis of this question with special attention to the possible role of net oil price increases in amplifying the transmission of oil price shocks. We quantify the conditional recessionary effect of oil price shocks in the net oil price increase model for all episodes of net oil price increases since the mid-1970s. Compared to the linear model, the cumulative effect of ...
Journal Article
Current Monetary Policy May Be Less Restrictive Than It Seems
Compared with most historical inflationary episodes since the 1960s, the current U.S. inflation cycle features both higher core inflation and a more resilient real economy. This co-movement of prices and real activity suggests monetary policy has not sufficiently reduced demand. We examine the current policy stance and argue that interest rates may indeed be less restrictive than commonly thought. To lower inflation to 2 percent, the Federal Reserve may have to maintain a restrictive policy stance for some time.