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The post-crisis slump in Europe: a business cycle accounting analysis

Author

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  • Gerth Florian

    (School of Economics, University of Kent, Canterbury, Kent, CT2 7NP, UK, Phone: +44-1227-824437)

  • Otsu Keisuke

    (Keio University Faculty of Business and Commerce, 2-15-45 Mita, Minato-Ku, Tokyo 108-8345, Japan)

Abstract

This paper analyzes the post-crisis slump in 30 European economies during the 2008Q1–2014Q4 period using the business cycle accounting (BCA) method à la [Chari, V. V., P. Kehoe, and E. McGrattan. 2007. “Business Cycle Accounting.” Econometrica 75 (3): 781–836]. We find that the deterioration in the efficiency wedge is the most important driver of the European Great Recession and that this adverse shock persists throughout our sample. Moreover, we find that countries with higher growth in nonperforming loans feature a smaller decline in efficiency wedges. These findings support the emerging literature on resource misallocation triggered by financial crises.

Suggested Citation

  • Gerth Florian & Otsu Keisuke, 2018. "The post-crisis slump in Europe: a business cycle accounting analysis," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(1), pages 1-25, January.
    • Handle: RePEc:bpj:bejmac:v:18:y:2018:i:1:p:25:n:3
    DOI: 10.1515/bejm-2016-0189
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    Cited by:

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    3. Masaru INABA & Kengo NUTAHARA & Daichi SHIRAI, 2023. "Sources of Inequality and Business Cycles: Evidence from the US and Japan," CIGS Working Paper Series 23-006E, The Canon Institute for Global Studies.
    4. Ibhagui, Oyakhilome, 2017. "How Does Foreign Direct Investment Affect Growth in Sub-Saharan Africa? New Evidence from Non-threshold and Threshold Analysis," MPRA Paper 85784, University Library of Munich, Germany.
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    6. Florian Gerth, 2017. "Allocative efficiency of UK firms during the Great Recession," Studies in Economics 1714, School of Economics, University of Kent.
    7. Gerth, Florian, 2023. "Nexus between Financial Inclusion and Economic Activity: A Study about Traditional and Non-Traditional Financial Service Indicators Determining Financial Outreach," MPRA Paper 119265, University Library of Munich, Germany.

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    More about this item

    Keywords

    business cycle accounting; European economy; Great Recession;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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