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Does capacity utilisation help estimating the TFP cycle

Author(s): C. Planas, European Commission, Joint Research Centre, W. Roeger, European Commission, DG ECFIN, A. Rossi, European Commission, Joint Research Centre

Does capacity utilisation help estimating the TFP cycle - C. Planas, W. Roeger and A. Rossipdf(753 kB) Choose translations of the previous link 

Summary for non-specialistspdf(80 kB) Choose translations of the previous link 

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.

(European Economy. Economic Papers 410. May 2010. Brussels. PDF. Tab. Graph. Bibliogr. Free.)

KC-AI-10-410-EN-N (online)
ISBN 978-92-79-14896-5 (online)
ISSN 1725-3187 (online)
doi: 10.2765/41165 (online)

JEL classification: C11 E23 E32

Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.

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