Long-Run Productivity Shifts and Cyclical Fluctuations: Evidence for Italy

Silvia Sgherri

No 2005/228, IMF Working Papers from International Monetary Fund

Abstract: Using unobserved stochastic components and Kalman filter techniques, the paper assesses the relative importance of transitory and permanent shifts in Italian real GDP within a production function framework. Evidence suggests that the increase in hours worked that has accompanied pension and labor market reforms accounts for the bulk of low-frequency variation in growth, but points to factor utilization as the main driver of business cycle fluctuations. In contrast with the predictions of standard Real Business Cycle models, a positive shock to the underlying rate of total factor productivity growth generates a slight decline in hours, whereas the response of output to the same shock is found to be positive.

Keywords: WP (search for similar items in EconPapers)
Pages: 37
Date: 2005-12-01
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Citations: View citations in EconPapers (7)

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