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Productivity, Energy Prices and the Great Moderation: A New Link

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  • Rajeev Dhawan

    (Georgia State University)

  • Karsten Jeske

    (Mellon Capital Management)

  • Pedro Silos

    (Federal Reserve Bank of Atlanta)

Abstract

We build upon recent research that attributes the moderation of output volatility since the 1980s to the reduced volatility of the Total Factor Productivity (TFP) by investigating the linkage between energy price fluctuations and the stochastic process for TFP. First, we estimate a joint stochastic process for the energy price and TFP and establish that until around 1982, energy prices negatively affected TFP. This spillover has since disappeared. Second, we show that within the framework of a Dynamic Stochastic General Equilibrium (DSGE) model, the disappearance of this energy-productivity spillover accounts for close to 68 percent of the moderation in output volatility. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 13 (2010)
Issue (Month): 3 (July)
Pages: 715-724

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Handle: RePEc:red:issued:09-14

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Keywords: Productivity; Energy price; Great moderation; Business cycles; Bayesian estimation;

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References

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Cited by:
  1. Carolyn Fischer & Garth Heutel, 2013. "Environmental Macroeconomics: Environmental Policy, Business Cycles, and Directed Technical Change," Annual Review of Resource Economics, Annual Reviews, Annual Reviews, vol. 5(1), pages 197-210, 06.
  2. Yazid Dissou & Lilia Karnizova & Qian Sun, 2012. "Industry-level Econometric Estimates of Energy-capital-labour Substitution with a Nested CES Production Function," Working Papers, University of Ottawa, Department of Economics 1214E, University of Ottawa, Department of Economics.
  3. Jambu, Marc-Antoine, 2010. "Has the Globalisation really generated more competition in OECD economies," MPRA Paper 19974, University Library of Munich, Germany.
  4. Munechika Katayama, 2013. "Declining Effects of Oil Price Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 45(6), pages 977-1016, 09.
  5. Pedro Silos & Karsten Jeske & Rajeev Dhawan, 2008. "Productivity, Energy Prices and the Great Moderation: A New Link," 2008 Meeting Papers 877, Society for Economic Dynamics.
  6. Finn E. Kydland & Fei Mao & William T. Gavin, 2011. "Monetary Policy, the Tax Code, and Energy Price Shocks," 2011 Meeting Papers, Society for Economic Dynamics 1160, Society for Economic Dynamics.
  7. William T. Gavin & Benjamin D. Keen & Finn E. Kydland, 2013. "Monetary policy, the tax code, and the real effects of energy shocks," Working Papers, Federal Reserve Bank of St. Louis 2013-019, Federal Reserve Bank of St. Louis.

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