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Does capacity utilisation help estimating the TFP cycle?

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  • 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.

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File URL: http://ec.europa.eu/economy_finance/publications/economic_paper/2010/pdf/ecp410_en.pdf
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Bibliographic Info

Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 410.

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Length: 77 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:euf:ecopap:0410

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Cited by:
  1. 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.
  2. 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.
  3. 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.
  4. Chetouane, Mabrouk & Lemoine, Matthieu & De la Serve, Marie-Elisabeth, 2011. "Impact de la crise sur la croissance potentielle. Une approche par les modèles à composantes inobservables," Economics Papers from University Paris Dauphine 123456789/6706, Paris Dauphine University.
  5. 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.
  6. 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.

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