An alternative view of shocks and gaps But there is an alternative interpretation. Let’s look at a rather simple, but I think useful, figure.1 The figure shows the level of real GDP as well as various vintages of potential GDP estimated by the U.S. Congressional Budget Office (CBO).
The date failed to provide the public with a clear understanding of what conditions the FOMC was trying to achieve or the economic conditions that would warrant a continuation of the policy. As a consequence, it was hard for the public to tell whether a change in the calendar date reflected a shift in policy or a change in the Committee’s economic forecast.