Reliability of EU Methods to Estimate Production Potential in Germany

The output gap has been the focal point of the fixed rules of fiscal policy in the European Union since 2012 as part of the fiscal pact. Estimated figures for output gaps establish the financial policy scope for member states to accumulate debt. This article offers a preliminary assessment of implementation of the EU methods in Germany between 2010 and 2015 and initial indications of the extent to which current methods are suitable as binding rules for fiscal policy.