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

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

The B.E. Journal of Macroeconomics, 2018, vol. 18, issue 1, 25

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.

Keywords: business cycle accounting; European economy; Great Recession (search for similar items in EconPapers)
JEL-codes: E13 E32 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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DOI: 10.1515/bejm-2016-0189

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