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Implementation Cycles in the New Economy

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  • Pasquale Scaramozzino
  • Jonathan Temple
  • Nir Vulkan

    ()

Abstract

The economic boom of the USA in the 1990s was remarkable in its duration, the sustained rise in equipment investment, the reduced volatility of productivity growth, and continued uncertainty about the trend growth rate. In this paper we link these phenomena using an extension of the classic model of implementation cycles due to Shleifer (1986). The key idea is that uncertainty about the trend growth rate can lead firms to bring forward the implementation of innovations, temporarily eliminating expectations-driven business cycles, because delay is risky when beliefs are not common knowledge.

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Bibliographic Info

Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 05/569.

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Length: 30 pages
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:bri:uobdis:05/569

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Keywords: Implementation cycles; New Economy; multiple equilibria.;

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  1. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275R, Cowles Foundation for Research in Economics, Yale University, revised Aug 2001.
  2. George W. Stadler, 1994. "Real Business Cycles," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1750-1783, December.
  3. Lubos Pástor & Pietro Veronesi, 2005. "Rational IPO Waves," Journal of Finance, American Finance Association, vol. 60(4), pages 1713-1757, 08.
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  7. Stephen Morris & Hyun Song Shin, 2001. "Rethinking Multiple Equilibria in Macroeconomic Modeling," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 139-182 National Bureau of Economic Research, Inc.
  8. Shleifer, Andrei, 1986. "Implementation Cycles," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1163-90, December.
  9. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
  10. Pasquale Scaramozzino & Nir Vulkan, 2004. "Uncertainty and Endogenous Selection of Economic Equilibria," Metroeconomica, Wiley Blackwell, vol. 55(1), pages 22-40, 02.
  11. Silvestre, Joaquim, 1993. "The Market-Power Foundations of Macroeconomic Policy," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 105-41, March.
  12. Morris, S & Song Shin, H, 1996. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," Economics Papers 126, Economics Group, Nuffield College, University of Oxford.
  13. Bart Hobijn & Boyan Jovanovic, 2001. "The Information-Technology Revolution and the Stock Market: Evidence," American Economic Review, American Economic Association, vol. 91(5), pages 1203-1220, December.
  14. Roger E. A. Farmer, 1999. "Macroeconomics of Self-fulfilling Prophecies, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262062038, January.
  15. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
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