At that time, the measurement error for the output gap reached a size of up to four percentage points (depending on the estimation method used). In this particular case, the error was due to a temporary underestimation of actual output as well as to a more persistent overestimation of potential output.
Doepke’s results thus provide additional evidence that measurement problems can seriously distort the assessment of current economic activity relative to its long-run trend. Second, Thomas Knetsch has analysed the importance of inventory investment for German business cycles. He finds that preliminary national accounts data of inventory investment are generally of poor quality.