An alternative micro-based output gap measure for Turkey: The capacity utilisation gap

•Capacity utilisation gap is proposed as an alternative output gap measure.•It relies on firm-level micro data provided by the Central Bank of the Republic of Turkey.•The capacity utilisation gap is timely and revision-free.•It gives information about the economy one quarter earlier than the alternatives.

We propose a capacity utilisation gap as an alternative measure of the output gap in the Turkish economy on the basis of firm-level micro data. Estimation results provide supporting evidence for the adequacy of a capacity utilisation gap as an alternative indicator for assessing the overall state of the business cycle and inflation pressures.