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A Post-crisis Slump in Europe: A Business Cycle Accounting Analysis

Author

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  • Florian Gerth

    ()

  • Keisuke Otsu

    ()

Abstract

This paper analyses the Post-crisis slump in 29 European economies during the 2008Q1 - 2014Q4 period using the Business Cycle Accounting (BCA) method a la Chari, Kehoe and McGrattan (2007). 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 the growth rate of non-performing loans are negatively associated with the decline in efficiency wedges. These findings support the emerging literature on resource misallocation triggered by financial crises.

Suggested Citation

  • Florian Gerth & Keisuke Otsu, 2016. "A Post-crisis Slump in Europe: A Business Cycle Accounting Analysis," Studies in Economics 1606, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:1606
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    References listed on IDEAS

    as
    1. Alex Klein & Keisuke Otsu, 2013. "Efficiency, Distortions and Factor Utilization during the Interwar Period," Studies in Economics 1317, School of Economics, University of Kent.
    2. Brinca, Pedro, 2014. "Distortions in the neoclassical growth model: A cross-country analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 47(C), pages 1-19.
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    Cited by:

    1. T. Libert, 2017. "Misallocation Before, During and After the Great Recession," Working papers 658, Banque de France.
    2. 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.
    3. Florian Gerth, 2017. "Allocative efficiency of UK firms during the Great Recession," Studies in Economics 1714, School of Economics, University of Kent.

    More about this item

    Keywords

    Great Recession in Europe; Business Cycle Accounting;

    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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