The Italian productivity slowdown in a Real Business Cycle perspective

Francesca Marino ()
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Francesca Marino: Università degli studi di Bari (IT)

International Review of Economics, 2016, vol. 63, issue 2, No 5, 193 pages

Abstract: Abstract This paper investigates the structural relation between the Italian weak macroeconomic performances and the productivity decline experienced over the last 15 years, estimating a Dynamic Stochastic General Equilibrium model. Modifying Ireland and Schuh’s (Rev Econ Dyn 11:473–492, 2008) two-sector RBC model in order to account for cointegration between consumption and investment, we interpret the unsatisfactory Italian economic dynamics in the light of a permanent negative shock to the component of productivity which is common across the consumption-good and the investment-good sector. In the light of our results, the common view that the Italian productivity problems involve only the Made in Italy sectors is only partially confirmed, since growth in the investment-good sector relies on the counterbalancing properties of its transitory sector-specific productivity component. Moreover, the model indirectly stresses the importance of the intermediate-good productions in the observed productivity decline. The short- and long-run implications of productivity dynamics for consumption, investment and hours worked are also discussed.

Keywords: Real Business Cycle model; Italian productivity slowdown; Structural approach; Two sectors (search for similar items in EconPapers)
JEL-codes: E32 O41 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s12232-015-0248-6

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