The information content of capacity utilization for detrending total factor productivity
In the production function approach, an accurate output gap assessment requires a careful evaluation of the total factor productivity (TFP) cycle. We build a common cycle model that links TFP to capacity utilization and we show that, in almost all of the pre-enlargement EU
countries, using information about capacity utilization reduces both the total estimation error and the revisions in real-time estimates of the concurrent TFP cycle compared to a univariate decomposition. We also argue that relaxing the constant drift hypothesis in favour of a non-linear specification helps to offset a general tendency to underestimate the TFP cycle in the last decade.
PLANAS Christophe;
ROEGER Werner;
ROSSI Alessandro;
2013-01-31
ELSEVIER SCIENCE BV
JRC74777
0165-1889,
https://publications.jrc.ec.europa.eu/repository/handle/JRC74777,
10.1016/j.jedc.2012.09.005,
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