In this paper, we measure the main factors explaining nominal output growth and deviations from trend output in Switzerland over the period 1980 to 2001. The decompositions are based on the GDP function and its dual, the national income function. The results indicate that whereas nominal output growth frequently reflects movements in domestic prices, it is capital formation that makes the largest contribution to real output growth, followed by gains in total factor productivity and improvements in the terms of trade. Deviations of real output from trend appear to have been driven by deviations of labour utilization, of productivity and, during the first decade, of the terms of trade from their respective long-run trends. The important role attributed to productivity and the terms of trade support the view that the customary measures of the output gap should be used with caution when formulating monetary policy.