Technology Shocks and Cointegration in Quadratic Models of the Firm

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Technology Shocks and Cointegration in Quadratic Models of the Firm

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Rossana, Robert J

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Robert J. Rossana

Abstract

In two quadratic models of a firm, it is shown that, if the firm's production function is not separable in its arguments, then the presence of any unit root technology shock will prevent factor inputs from being cointegrated with input prices. Absent integrated technology shocks, there will be one cointegrating vector for every quasi-fixed factor held by the firm, thereby providing one possible rationale for multiple cointegrating vectors in multivariate time series systems. The parameters of these cointegrating vectors may be used to recover the parameters of the static factor demand functions obeyed by the firm. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 36 (1995)
Issue (Month): 1 (February)
Pages: 5-17
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Handle: RePEc:ier:iecrev:v:36:y:1995:i:1:p:5-17

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H. Youn Kim & Junsoo Lee, 2001. "Quasi-fixed inputs and long-run equilibrium in production: a cointegration analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(1), pages 41-57. [Downloadable!]
Anindya BANERJEE & Paul MIZEN, 2003. "A Re-interpretation of the Linear-Quadratic Model When Inventories and Sales are Polynomially Cointegrated," Economics Working Papers ECO2003/11, European University Institute. [Downloadable!]
Other versions:
- Paul Mizen & Anindya Banerjee, 2006. "A re-interpretation of the linear quadratic model when inventories and sales are polynomially cointegrated," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(8), pages 1249-1264. [Downloadable!]

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