Measures that arbitrarily, or by assumption, assign the bulk of fluctuation in GDP to purely temporary factors may provide poor policy guidance when shocks are more permanent in nature. A different conceptual approach to defining a gap is implied by a class of economic models in wide use today – the new Keynesian dynamic stochastic general equilibrium, or DSGE, models.
DSGE models explicitly posit that firms have some pricing power; that is, there is imperfect competition so that a firm can choose to sell more of its output by lowering its price or to sell less of its output by raising its price, and the firm will set its price at a markup over marginal cost to maximize its profits.