Estimating Potential Output with a Production Function for France, Germany and Italy

M. Baghli, Christophe Cahn and Jean-Pierre Villetelle

Working papers from Banque de France

Abstract: This paper discusses the supply conditions for economic growth in terms of potential GDP estimated by the production function approach for France, Germany and Italy for the 1986:2003 period. The aim of this study is twofold: first, we keep a consistent framework as regards national account institutional sectors. Second, after defining Total Factor Productivity (TFP) in the so-called productive sector from the Solow residual, we specify it in a general framework for the three countries as a function of a time trend corrected for the effects of the age of equipments and the capacity utilisation rate (CUR). This framework allows to distinguish temporal considerations: in the medium to long term, the variables that could generate short to medium term fluctuations in potential output growth are assumed to be stable at a structural level. This implies modifications of the functional specifications related to the time horizon.

Keywords: Potential growth; Production function; Total factor productivity; Age of equipments. (search for similar items in EconPapers)
JEL-codes: C51 E32 O11 O47 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Chapter: Estimating Potential Output with a Production Function for France, Germany and Italy (2006)
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