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Technology Innovations and the Volatility of Output: An International Perspective

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Author Info
Christian Zimmermann () (Center for Research on Economic Fluctuations and Employment, UQAM)

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Abstract

This paper aims at improving the measure of how much of the business cycle can be explained by technology innovations. For this, we measure the Solow residuals and calibrate a two country real business cycle model for 19 economies. A new procedure is used to determine the elasticity of substitution between domestic and foreign goods, giving for most of the economies a higher elasticity than commonly measured. Another finding is that technology innovations explain more of the business cycle in an open economy model than in a closed economy one. The key result is that the volatility of output is higher in the simulations than in the data for most of the economies, contrarily to common belief.

Cette étude vise à améliorer la proportion du cycle conjoncturel explicable par des innovations technologiques. À cet effet, nous mesurons des résidus de Solow et calibrons un modèle du cycle réel à deux pays pour 19 économies. Une nouvelle procédure est utilisée pour déterminer l'élasticité de substitution entre biens domestique et étranger, menant pour la plupart des économies à une élasticité plus élevée que la valuer standard. Un autre résultat est qu'ouvrir une économie permet d'expliquer une plus grande partie du cycle. Le résultat principal est que l'amplitude du cycle est plus forte dans les simulations que dans les données pour la grande majorité des économies, au contraire de la croyance usuelle.

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Publisher Info
Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 34.

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Length: 25 pages
Date of creation: Dec 1994
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Handle: RePEc:cre:crefwp:34

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Related research
Keywords: open economy macroeconomics real business cycle models

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

References listed on IDEAS
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  1. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22. [Downloadable!]
    Other versions:
  2. Kydland, Finn E & Prescott, Edward C, 1991. "Hours and Employment Variation in Business Cycle Theory," Economic Theory, Springer, vol. 1(1), pages 63-81, January.
    Other versions:
  3. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March. [Downloadable!] (restricted)
    Other versions:
  4. Gary D. Hansen, 1989. "Technical Progress and Aggregate Fluctuations," UCLA Economics Working Papers 546, UCLA Department of Economics. [Downloadable!]
    Other versions:
  5. Christian Zimmermann, 1996. "International Real Business Cycles among Heterogeneous Countries," Macroeconomics 9607002, EconWPA. [Downloadable!]
    Other versions:
  6. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  7. Dellas, Harris, 1986. "A real model of the world business cycle," Journal of International Money and Finance, Elsevier, vol. 5(3), pages 381-394, September. [Downloadable!] (restricted)
  8. Kakwani, N C, 1972. "On the Bias in Estimates of Import Demand Parameters," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(2), pages 239-44, June. [Downloadable!] (restricted)
  9. Kydland, Finn E. & Prescott, Edward C., 1988. "The workweek of capital and its cyclical implications," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 343-360. [Downloadable!] (restricted)
  10. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-75, August. [Downloadable!] (restricted)
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  11. Bennett T. McCallum, 1990. "Real Business Cycle Models," NBER Working Papers 2480, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael Gail, 1998. "Stylized Facts and International Business Cycles - The German Case," Volkswirtschaftliche Diskussionsbeitraege 69-98, Universitaet Siegen, Fachbereich Wirtschaftswissenschaften, revised 09 Jul 2000. [Downloadable!]
  2. Christian Zimmermann, 1995. "International Real Business Cycles among Heterogeneous Countries," Cahiers de recherche CREFE / CREFE Working Papers 38, CREFE, Université du Québec à Montréal. [Downloadable!]
    Other versions:
  3. Christian Zimmermann, 1995. "International Trade over the Business Cycle: Stylized Facts and Remaining Puzzles," Cahiers de recherche CREFE / CREFE Working Papers 37, CREFE, Université du Québec à Montréal, revised Aug 1997. [Downloadable!]
  4. Rangan Gupta, 2005. "Financial Liberalization and Inflationary Dynamics: An Open Economy Analysis," Working papers 2005-32, University of Connecticut, Department of Economics. [Downloadable!]
    Other versions:
  5. Rangan Gupta, 2005. "Endogenous Tax Evasion and Reserve Requirements: A Comparative Study in the Context of European Economies," Computing in Economics and Finance 2005 328, Society for Computational Economics. [Downloadable!]
  6. Christian Zimmermann, 1996. "Business Cycles and Exchange Rate Regimes," Cahiers de recherche CREFE / CREFE Working Papers 45, CREFE, Université du Québec à Montréal. [Downloadable!]
  7. Christian Zimmermann, 1994. "International Business Cycles and Exchange Rates," Cahiers de recherche CREFE / CREFE Working Papers 33, CREFE, Université du Québec à Montréal, revised Jul 1997. [Downloadable!]
    Other versions:
  8. Alejandro Justiniano, 2004. "Sources and Propagation Mechanims of Foreign Disturbances in Small Open Economies: A Dynamic Factor Analysis," Econometric Society 2004 Latin American Meetings 148, Econometric Society. [Downloadable!]
  9. Lilia Maliar & Liudmyla Hvozdyk & Serguei Maliar, 2006. "Downward Nominal Wage Rigidity: The Implications From A New-Keynesian Model," Working Papers. Serie AD 2006-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  10. Christian Zimmermann, 2001. "Forecasting with Real Business Cycle Models," Cahiers de recherche CREFE / CREFE Working Papers 131, CREFE, Université du Québec à Montréal. [Downloadable!]
    Other versions:
  11. Rangan Gupta, 2004. "Costly State Monitoring and Reserve Requirements," Working papers 2004-33, University of Connecticut, Department of Economics, revised Jul 2005. [Downloadable!]
  12. Rangan Gupta, 2005. "Tax Evasion and Financial Repression," Working papers 2005-34, University of Connecticut, Department of Economics, revised Jun 2007. [Downloadable!]
  13. Rangan Gupta, 2005. "A Generic Model of Financial Repression," Working papers 2005-20, University of Connecticut, Department of Economics, revised Jul 2005. [Downloadable!]
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