School of Economics

2016 Discussion papers


School of Economics Discussion Paper 16/06


The Post-crisis Slump in Europe: A Business
Cycle Accounting Analysis


Florian Gerth and Keisuke Otsu
University of Kent


September 2016

Abstract:

This paper analyses the Post-crisis slump in 29 European economies during the 2008Q1 - 2014Q4 period using the Business Cycle Accounting (BCA) method á la Chari, Kehoe and McGrattan (2007). 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 the growth rate of non-performing loans are negatively associated with the decline in efficiency wedges. These findings support the emerging literature on resource misallocation triggered by financial crises

JEL Classification:
E13; E32

Keywords: Great Recession in Europe; Business Cycle Accounting



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Last Updated: 07/09/2016