Euro area output gap estimates revolutionize economic forecasting with industrial production.
The article examines how different economic factors can help estimate the euro area output gap. By using various models, the researchers found that including industrial production in the analysis produced the most accurate output gap estimates. They also discovered that investment is a leading indicator for the euro area, with its cyclical components leading those of inflation and unemployment. The study highlights the importance of considering multiple variables and their relationships when measuring the output gap in the euro area.