We report a study of the effect of optical absorption on generation of coherent infrared radiation from mid-IR to THz region from GaSe crystal. The infrared-active modes of ε-GaSe crystal at 236 cm-1 and 214 cm were found to be responsible for the observed optical dispersion and infrared absorption edge. Based upon phase matching characteristics of GaSe for difference-frequency generation (DFG), new Sellmeier equations of GaSe were proposed. The output THz power variation with wavelength can be properly explained with a decrease of parametric gain and the spectral profile of absorption coefficient of GaSe. The adverse effect of infrared absorption on (DFG) process can partially be compensated by doping GaSe crystal with erbium ions.