Now, we can make the same analysis of any group of countries, right?
It's usually easiest with the developed countries because the OECD gives us
a very, the OECD gives us a very precise estimate every year, of
how much the economy could produce if it were at potential, at that
rate of growth it can sustain
over the medium term without accelerating inflation.
And so, you can actually go to the OECD webpage, OECD.org.
Go to statistics, look for the output gap, and you
can find these numbers for a wide range of countries.
I've just put on this slide four
countries, the United States is here again,
I've put Finland, Japan and Portugal to
give us, you know, some different situations and
we start in 1990 and go until 2010, and you can see, on this
slide, that again, there is the profile of the United States, it's the red bars.
And you can see that the United States has a positive output gap
at the beginning of the 90s and then it's got a negative one.
In other words, it's growing too slowly throughout the 90s until we hit, the
early the, the end of the 90s and then going into the early 2000s.
I'd like you to look, at Japan next, which
is the green bars and Japan is very interesting.
Here you can see that Japan in the early 1990s, was growing way above potential.
It had a positive output gap.
In other words, it was overheating, we might say.
And you can see that as the Japanese financial crisis hit in the
1990s, that this output gap shrinks, and eventually, it becomes negative.
So, you can see they are growing below potential, starting
in the late 90s and going almost to the present time.
This is really long negative output gap which we'll give another name to soon.
Because you know that in the late 90s, the Southeast Asian crisis began.
This hit Japanese banks when they were just kind
of starting to recover from their own financial crisis.
This accounts for the later output gap.
And then we get, of course, the global financial
crisis, which pushes them down again, in, in the 2000s.
You can see Finland here, and Finland's an interesting
story, because, with the fall of the Soviet Union, Finland
kind of moving out of this period of Finlandization,
of kind of a dependence on the Soviet block countries.
You can see, they had an enormous negative output gap in the 1990s.