exposed by the crisis. in 2007, real time estimates from a range of international institutions – the european commission, the imf, the oecd – envisaged the euro area output gap at that time to be in the range of minus 0. 6 % to minus – 0. 2 %. according to the most recent estimates, however, we now think that the euro area output gap in 2007 was in the range of plus 2. 6 % to 3. 3 %. this shows how wrong real - time estimates can be. not only was the size of the output gap significantly mis - measured – with real - time estimates subsequently revised up by some 3 – 4 percentage points – but, more importantly, even the sign of the gap was wrong. this example is not just an aberration : large errors are inherent in the concept of the output gap. and worse still, at the critical moments when policymakers need to understand what ’ s see potential output from a euro area perspective ( ecb occasional paper series no 156, november 2014 ). bis central bankers ’ speeches happening in the economy – in the build - up to and aftermath of crises – measures of output gap are often at their least dependable. 2 so that poor track record in the run up to the crisis is one reason why i ’ m sceptical of finetuning. but there ’ s also a second one : such difficulties are only likely to increase given current trends in the economy and society – and not just in estimating potential output, but in measuring actual output too. 3 we ’ re living through an era where the nature of production and consumption is changing rapidly. and that has profound implications for our ability to understand the economy – or, at least, our ability to adequately measure what is actually being produced and how efficiently this is achieved. consider, for example, the difficulties that the digital economy creates for measuring labour input. as highlighted in a recent statistical study, the growth of the “ sharing economy ” is creating new opportunities for self - employment : people who work on a shift pattern in a retail store might spend their off - days driving an uber taxi. this kind of “ micro ” activity might be less simple to measure than the services of traditional taxi firms, as it may be less likely to show up in earnings data. 4 measuring investment in a digital economy is equally tricky, as much of it concerns intangible capital. we have now started classifying r & d as investment, which

, maarten dossche, marien ferdinandusse, federic holm - hadulla, john hutchinson, danielle kedan, nick ligthart, arthur saint - guilhem and roberto de santis for their contributions to this speech. [ 2 ] see also lagarde, c. ( 2020 ), “ monetary policy in a pandemic emergency ”, keynote speech at the ecb forum on central banking, 11 november ; lane, p. r. ( 2020 ), “ understanding the pandemic emergency purchase programme ”, speech at the princeton bcf covid - 19 webinar series, 22 june ; lane, p. r. ( 2020 ), “ the pandemic emergency : the three challenges for the ecb ”, speech at the jackson hole economic policy symposium, federal reserve bank of kansas city, 27 august ; lane, p. r. ( 2020 ), “ the ecb ’ s monetary policy in the pandemic : meeting the challenge ”, speech at the 62nd nabe annual meeting, 6 october. [ 3 ] for a full list of ecb measures in response to the pandemic, see chart 4 in lane, p. r. ( 2020 ), “ the ecb ’ s monetary policy in the pandemic : meeting the challenge ”, speech at the 62nd nabe annual meeting, 6 october [ 4 ] see also de guindos, l. and schnabel, i. ( 2020 ), “ improving funding conditions for the real economy during the covid - 19 crisis : the ecb ’ s collateral easing measures ”, blog post, 22 april. [ 5 ] see also lane, p. r. ( 2020 ), “ the market stabilisation role of the pandemic emergency purchase programme ”, ecb blog post, 22 june. [ 6 ] to arrive at these estimates, a suite of models is deployed. this approach reflects the uncertainty about the most appropriate model representation of the monetary transmission, which is particularly acute when the monetary impulse is imparted through unconventional tools such as asset purchase programmes. adopting such a broad - based modelling approach increases the robustness of the estimates. [ 7 ] see lane, p. r. ( 2020 ), “ the ecb ’ s monetary policy response to the pandemic : liquidity, stabilisation and supporting the recovery ”, speech at the financial center breakfast webinar organised by frankfurt main finance