by Marco Fioramanti, Flavio Padrini and Corrado Pollastri
The paper analyzes the sensitivity of the potential GDP and output gap estimates used by the European Commission in monitoring the Stability and Growth Pact. The sensitivity analysis shows that the revisions of the EC estimates over time have been extensive, a phenomenon also observed for estimates released by the OECD. The revisions are explained in large part by the labor component, in particular by the revision of the estimated NAWRU (the unemployment rate compatible with wage stability), which is very sensitive to the assumptions on inflation expectations and to the technical specifications for the statistical filter used in its calculation.
Text of document (in Italian)