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Assessing the losses in euro area potential productivity due to the financial crisis

Listed author(s):
  • Chouard, V.
  • Fuentes Castro, D.
  • Irac, D.
  • Lemoine, M.

In this paper, we show that the recent financial crisis has significantly affected the potential total factor productivity (TFP) of the four largest euro area economies, as well as that of the rest of the euro area. We used a reduced-form equation of TFP, based on an approach recently developed by Cahn and Saint-Guilhem (2010). Our empirical findings show that the permanent impact on potential TFP varies across countries from -3.9 points to -1.3 points in Q2 2012. When these losses are incorporated, TFP gaps develop closely in line with capacity utilisation rates (CUR). Moreover, in the case of France, including CUR in our TFP model improves the quasi real-time reliability of TFP gap estimates.

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File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/working-paper_468_2013.pdf
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Paper provided by Banque de France in its series Working papers with number 468.

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Length: 24 pages
Date of creation: 2013
Handle: RePEc:bfr:banfra:468
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Web page: http://www.banque-france.fr/

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  1. Christophe Cahn & Arthur Saint-Guilhem, 2010. "Potential output growth in several industrialised countries a comparison," Empirical Economics, Springer, vol. 39(1), pages 139-165, August.
  2. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
  3. Philippe Aghion & Philippe Askenazy & Nicolas Berman & Gilbert Cette & Laurent Eymard, 2012. "Credit Constraints And The Cyclicality Of R&D Investment: Evidence From France," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 1001-1024, October.
  4. Planas, C. & Roeger, W. & Rossi, A., 2013. "The information content of capacity utilization for detrending total factor productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 37(3), pages 577-590.
  5. Athanasios Orphanides & Simon van Norden, 2002. "The Unreliability of Output-Gap Estimates in Real Time," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 569-583, November.
  6. Nicholas Oulton & María Sebastiá-Barriel, 2013. "Long and Short-Term Effects of the Financial Crisis on Labour Productivity, Capital and Output," CEP Discussion Papers dp1185, Centre for Economic Performance, LSE.
  7. Antoine Bonleu & Gilbert Cette & Guillaume Horny, 2013. "Capital utilization and retirement," Applied Economics, Taylor & Francis Journals, vol. 45(24), pages 3483-3494, August.
  8. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
  9. N/A, 2009. "On the Recession," Local Economy, London South Bank University, vol. 24(3), pages 253-253, May.
  10. Barlevy, Gadi, 2003. "Credit market frictions and the allocation of resources over the business cycle," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1795-1818, November.
  11. Ouyang, Min, 2009. "The scarring effect of recessions," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 184-199, March.
  12. Furceri, Davide & Mourougane, Annabelle, 2012. "The effect of financial crises on potential output: New empirical evidence from OECD countries," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 822-832.
  13. Oulton,Nicholas & O'Mahony,Mary, 1994. "Productivity and Growth," Cambridge Books, Cambridge University Press, number 9780521453455, September.
  14. repec:hrv:faseco:30752812 is not listed on IDEAS
  15. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-1368, December.
  16. Gadi Barlevy, 2002. "The Sullying Effect of Recessions," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 65-96.
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