ABSTRACT
This chapter explores the status of uncertainty underlying the European Commission’s (EC) official estimates of the Greek economy’s potential output. Following a “case study” approach, this is done by analysing how a given officially estimated potential output path may be affected by different estimation assumptions. Simple graphical illustrations and elementary statistical comparisons reveal that the Spring 2017 vintage estimates are subject to the combined impact of considerable statistical uncertainty as well as various methodological choices and technical adjustments. From a more general perspective, these results add to a growing empirical literature asserting that potential output estimates are fairly “model dependent” and subject to considerable uncertainty. This considerable uncertainty may, in turn, affect policy-oriented measures based on potential output and output gap estimates, such as the “general government structural budget balance,” which is a common fiscal policy tool implemented under the Economic Governance framework of the European Union.
