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Does capacity utilisation help estimating the TFP cycle?

Author

Listed:
  • Christophe Planas
  • Werner Roeger
  • Alessandro Rossi

Abstract

In the production function approach, accurate output gap assessment requires a careful evaluation of the TFP cycle. In this paper we propose a bivariate model that links TFP to capacity utilization and we show that this model improves the TFP trend-cycle decomposition upon univariate and Hodrick-Prescott filtering. In particular, we show that estimates of the TFP cycle that load information about capacity utilization are less revised than univariate and HP estimates, both with 2009 and real-time TFPdata vintages. We obtain this evidence for twelve pre-enlargement EU countries.

Suggested Citation

  • Christophe Planas & Werner Roeger & Alessandro Rossi, 2010. "Does capacity utilisation help estimating the TFP cycle?," European Economy - Economic Papers 2008 - 2015 410, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0410
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    Citations

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    Cited by:

    1. György Barabas & Heinz Gebhardt & Torsten Schmidt & Klaus Weyerstraß, 2012. "Projektion der mittelfristigen Wirtschaftsentwicklung bis 2017: Eurokrise beeinträchtigt Wachstum der deutschen Wirtschaft auf mittlere Sicht kaum," RWI Konjunkturbericht, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 11, October.
    2. Mabrouk Chetouane & Matthieu Lemoine & Marie-Elisabeth de La Serve, 2011. "Impact de la crise sur la croissance potentielle," Post-Print hal-03389354, HAL.
    3. Dees, Stéphane, 2017. "The role of confidence shocks in business cycles and their global dimension," International Economics, Elsevier, vol. 151(C), pages 48-65.
    4. Torsten Schmidt & György Barabas & Heinz Gebhardt & Klaus Weyerstraß, 2012. "Projektion der mittelfristigen Wirtschaftsentwicklung bis 2016 - Deutschland bleibt auf moderatem Wachstumskurs," RWI Konjunkturbericht, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 8, 03.
    5. Breuer Sebastian & Elstner Steffen, 2020. "Germany’s Growth Prospects against the Backdrop of Demographic Change," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(5), pages 565-605, October.
    6. Daragh Clancy, 2013. "Output Gap Estimation Uncertainty: Extracting the TFP Cycle Using an Aggregated PMI Series," The Economic and Social Review, Economic and Social Studies, vol. 44(1), pages 1-18.
    7. Igor Lebrun, 2011. "Working Paper 08-11 - What has been the damage of the financial crisis to Belgian GDP? An assessment based on the FPB’s medium-term outlook," Working Papers 1108, Federal Planning Bureau, Belgium.
    8. Barabas, György & Gebhardt, Heinz & Schmidt, Torsten & Weyerstraß, Klaus, 2012. "Projektion der mittelfristigen Wirtschaftsentwicklung bis 2017: Eurokrise beeinträchtigt Wachstum der deutschen Wirtschaft auf mittlere Sicht kaum," RWI Konjunkturberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, vol. 63(2), pages 99-109.
    9. Wolfgang Nierhaus & Timo Wollmershäuser, 2016. "ifo Konjunkturumfragen und Konjunkturanalyse: Band II," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 72.
    10. Breuer, Sebastian & Elstner, Steffen, 2017. "Die Wachstumsperspektiven der deutschen Wirtschaft vor dem Hintergrund des demografischen Wandels: Die Mittelfristprojektion des Sachverständigenrates," Working Papers 07/2017, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    11. Mabrouk Chetouane & Matthieu Lemoine & Marie-Elisabeth de la Serve, 2011. "Impact de la crise sur la croissance potentielle. Une approche par les modèles à composantes inobservables," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 89-112.
    12. repec:dau:papers:123456789/6706 is not listed on IDEAS
    13. Delphine Bassilière & Didier Baudewyns & Francis Bossier & Ingrid Bracke & Igor Lebrun & Peter Stockman & Peter Willemé, 2013. "Working Paper 13-13 - A new version of the HERMES model - HERMES III," Working Papers 1313, Federal Planning Bureau, Belgium.
    14. Lemoine, M. & de la Serve, M.E. & Chetouane, M., 2011. "Impact of the crisis on potential growth: An approach based on unobserved component models (in french)," Working papers 331, Banque de France.
    15. Barabas, György & Schmidt, Torsten & Gebhardt, Heinz & Weyerstraß, Klaus, 2012. "Projektion der mittelfristigen Wirtschaftsentwicklung bis 2016: Deutschland bleibt auf moderatem Wachstumskurs," RWI Konjunkturberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, vol. 63(1), pages 101-108.
    16. Eddie Casey, 2019. "Inside the "Upside Down": Estimating Ireland's Output Gap," The Economic and Social Review, Economic and Social Studies, vol. 50(1), pages 5-34.
    17. Institut für Weltwirtschaft (IfW) (Ed.), 2011. "Zur Methode der Potentialschätzung," Kiel Insight 2011.10, Kiel Institute for the World Economy (IfW Kiel).
    18. repec:hal:spmain:info:hdl:2441/5l6uh8ogmqildh09h61k862c2 is not listed on IDEAS

    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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