Long-Run Productivity Shifts and Cyclical Fluctuations: Evidence for Italy
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Summary:
Using unobserved stochastic components and Kalman filter techniques, the paper assesses the relative importance of transitory and permanent shifts in Italian real GDP within a production function framework. Evidence suggests that the increase in hours worked that has accompanied pension and labor market reforms accounts for the bulk of low-frequency variation in growth, but points to factor utilization as the main driver of business cycle fluctuations. In contrast with the predictions of standard Real Business Cycle models, a positive shock to the underlying rate of total factor productivity growth generates a slight decline in hours, whereas the response of output to the same shock is found to be positive.
Series:
Working Paper No. 2005/228
Subject:
Business cycles Capacity utilization Labor Productivity Total factor productivity
English
Publication Date:
December 1, 2005
ISBN/ISSN:
9781451862478/1018-5941
Stock No:
WPIEA2005228
Pages:
37
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