Abstract
This paper analyzes the post-crisis slump in 30 European economies during the 2008Q1-2014Q4 period using the business cycle accounting (BCA) method à la [Chari, V. V., P. Kehoe, and E. McGrattan. 2007. "Business Cycle Accounting." Econometrica 75 (3): 781-836]. We find that the deterioration in the efficiency wedge is the most important driver of the European Great Recession and that this adverse shock persists throughout our sample. Moreover, we find that countries with higher growth in nonperforming loans feature a smaller decline in efficiency wedges. These findings support the emerging literature on resource misallocation triggered by financial crises.
Original language | English |
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Article number | 20160189 |
Journal | B.E. Journal of Macroeconomics |
Volume | 18 |
Issue number | 1 |
DOIs | |
Publication status | Published - 2018 Jan 26 |
Externally published | Yes |
Keywords
- European economy
- Great Recession
- business cycle accounting
ASJC Scopus subject areas
- Economics and Econometrics