Different modelling assumptions, such as different sets of real activity indicators and different specifications of the trend components of the variables, lead to different estimates of the output gap. These differences are economically very relevant, with some models estimating an output gap that was close to zero in 2014 on average, and others estimating remaining slack of as much as –6%.
One way to discriminate among different estimates of the output gap is to check their ability to forecast inflation. It turns out that the variants associated with a continuation of a positive growth trend, implying a wider output gap, are the ones that produce better inflation forecasts.