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Unobserved Factor Utilization, Technology Shocks and Business Cycles

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Author Info

  • Domenico J. Marchetti

    ()
    (Banca d'Italia)

  • francesco Nucci

    ()
    (Università di Roma "La Sapienza")

Abstract

We derive a measure of technological change using firm-level panel data and controlling for imperfect competition, increasing returns and unobserved factor utilization. We show that the latter variable accounts for a relevant portion of the cyclicality of the Solow residual. Our key finding is that technological shocks result in a contraction of inputs on impact. Whilst this result is hard to reconcile with the transmission mechanism of real business cycle models, it is consistent with simple sticky-price models. Using survey information on the frequency and size of price revisions, we show that the evidence on the contractionary effects of technology shocks is indeed much stronger for firms with stickier prices.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 392.

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Date of creation: Feb 2001
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Handle: RePEc:bdi:wptemi:td_392_01

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Postal: Via Nazionale, 91 - 00184 Roma
Web page: http://www.bancaditalia.it
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Related research

Keywords: factor hoarding; technology shocks; business cycles;

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References

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  1. Luigi Guiso & Fabiano Schivardi, 2000. "Information Spillovers and Factor Adjustment," Temi di discussione (Economic working papers) 368, Bank of Italy, Economic Research and International Relations Area.
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Cited by:
  1. Eugenio Gaiotti & Alessandro Secchi, 2004. "Is there a cost channel of monetary policy transmission? An investigation into the pricing behaviour of 2,000 firms," Temi di discussione (Economic working papers) 525, Bank of Italy, Economic Research and International Relations Area.
  2. Yongsung Chang & Jay H. Hong, 2003. "On the Employment Effect of Technology: Evidence from US Manufacturing for 1958-1996," PIER Working Paper Archive 03-004, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Luca Dedola & Eugenio Gaiotti & Luca Silipo, 2001. "Money demand in the euro area: do national differences matter?," Temi di discussione (Economic working papers) 405, Bank of Italy, Economic Research and International Relations Area.

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