The GDP gap or the output gap is the difference between potential output and actual output. Potential output is the level of output that can be achieved when the economy operates at full capacity (and the factors of production are thus utilised at non-inflationary levels). Output gaps can either be positive or negative.
The Group is mandated to ensure technically robust and transparent potential output and output gap indicators and cyclically adjusted budget balances in the context of the Stability and Growth Pact. The group should as appropriate develop progressively the commonly agreed method for calculating output gaps. This is particularly important in view of the 2005 agreements on the Stability and Growth Pact.
Work in the Group should focus on:
Membership of this group consists of experts on the concepts of potential output and output gaps. Participation could be varied according to the topics being examined, and will need to include experts on the assessment of tax revenues vis-à-vis macroeconomic developments. Experts from the OECD and the IMF also participate.
The Group will work closely with the Ageing Working Group.