Does capacity utilisation help estimating the TFP cycle?

Christophe Planas, Werner Roeger and Alessandro Rossi

No 410, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

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.

JEL-codes: C11 E23 E32 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2010-05
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-eff and nep-mic
References: View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecopap:0410

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