Does capacity utilisation help estimating the TFP cycle?
AbstractIn 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.
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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 410.
Length: 77 pages
Date of creation: May 2010
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Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-03 (All new papers)
- NEP-CBA-2010-07-03 (Central Banking)
- NEP-ECM-2010-07-03 (Econometrics)
- NEP-EFF-2010-07-03 (Efficiency & Productivity)
- NEP-MIC-2010-07-03 (Microeconomics)
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- 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.
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