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The UK long‐term outlook
Publication year - 2014
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/1468-0319.12054
Subject(s) - output gap , economics , potential output , financial crisis , monetary economics , fiscal policy , term (time) , monetary policy , macroeconomics , keynesian economics , physics , quantum mechanics
The question of the size of the output gap is crucially important to both fiscal and monetary policy. UK GDP ended 2013 around 1¼% below its pre‐crisis peak and were we to assume that potential output has continued to grow at historic rates since the financial crisis, this would suggest an output gap of 15% of potential GDP. However, it appears likely that the financial crisis has inflicted some structural damage to potential output which will never be reclaimed, implying a smaller output gap…