Title: Does capacity utilisation help estimating the TFP cycle?
Authors: PLANAS ChristopheROSSI AlessandroROEGER Werner
Citation: European Economy. Economic Papers. vol. 410 p. 1-75
Publisher: Publications Office of the European Union
Publication Year: 2010
JRC N°: JRC62739
ISSN: 1725-3187
URI: http://ec.europa.eu/economy_finance/publications/economic_paper/2010/ecp410_en.htm
DOI: 10.2765/41165
Type: Articles in periodicals and books
Abstract: 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.
JRC Directorate:Space, Security and Migration

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