The post-crisis slump in Europe: A business cycle accounting analysis

Florian Gerth, Keisuke Otsu

Research output: Contribution to journalArticle

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 languageEnglish
Article number20160189
JournalB.E. Journal of Macroeconomics
Volume18
Issue number1
DOIs
Publication statusPublished - 2018 Jan 26
Externally publishedYes

Keywords

  • European economy
  • Great Recession
  • business cycle accounting

ASJC Scopus subject areas

  • Economics and Econometrics

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