Template-Type: ReDIF-Paper 1.0

Author-Name: Federico Bassi
Author-X-Name-First: Federico
Author-X-Name-Last: Bassi
Author-Email: federico.bassi@unicatt.it
Author-Workplace-Name: Università Cattolica del Sacro Cuore
Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore

Title: Chronic Excess Capacity and Unemployment Hysteresis in EU Countries. A Structural Approach


Abstract: We develop a structural method for identifying the unobservable rate of capacity utilization in 14 EU countries, by simultaneously estimating the coefficients of a production function, an investment function, a labor productivity function and an unemployment function. Our results provide evidence of chronic underutilization of productive capacity and hysteresis in unemployment, especially after the 2008’ financial crisis. We show that our series of the rate of capacity utilization are significant predictors of capacity accumulation, productivity growth and unemployment rates. Moreover, they predict inflation as efficiently as the DG ECFIN series of capacity utilization and output gaps. 
Length: 47
Creation-Date: 2020-10
File-URL: http://dipartimenti.unicatt.it/economia-finanza-def091.pdf
File-Format: Application/pdf
File-Function: First version, 2020
Number: def091
Classification-JEL: C51, E22, E32. 
Keywords: Capacity utilization, Potential GDP, Output gap, Hysteresis.
Handle: RePEc:ctc:serie1:def091