Are predictable improvements in TFP contractionary or expansionary? implications from sectoral TFP
AbstractWe document in the US data: (1) The dominant predictable component of investment-sector TFP is its long-run movements, and a favorable shock to predictable changes in investmentsector TFP induces a broad economic boom that leads actual increases in investment-sector TFP by almost two years, and (2) predictable changes in consumption-sector TFP occur mainly at short forecast horizons, and a favorable shock to such predictable changes leads to immediate reductions in hours worked, investment, and output as well as an immediate rise in consumption-sector TFP. We argue that these documented differences in the responses to shocks to predictable sectoral TFP changes can reconcile the seemingly contradictory findings in Beaudry and Portier (2006) and Barsky and Sims (2011), whose analyses are based on aggregate TFP measures. In addition, we find that shocks to predictable changes in investment-sector TFP account for 50% of business cycle fluctuations in consumption, hours, investment, and output, while shocks to predictable changes in consumption-sector TFP explain only a small fraction of business cycle fluctuations of these aggregate variables.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 114.
Date of creation: 2012
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-13 (All new papers)
- NEP-BEC-2012-06-13 (Business Economics)
- NEP-DGE-2012-06-13 (Dynamic General Equilibrium)
- NEP-MAC-2012-06-13 (Macroeconomics)
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.:
- Robert B. Barsky & Eric R. Sims, 2009. "News Shocks," NBER Working Papers 15312, National Bureau of Economic Research, Inc.
- Paul Beaudry & Deokwoo Nam & Jian Wang, 2011.
"Do mood swings drive business cycles and is it rational?,"
Globalization and Monetary Policy Institute Working Paper
98, Federal Reserve Bank of Dallas.
- Paul Beaudry & Deokwoo Nam & Jian Wang, 2011. "Do Mood Swings Drive Business Cycles and is it Rational?," NBER Working Papers 17651, National Bureau of Economic Research, Inc.
- Neville Francis & Michael T. Owyang & Jennifer E. Roush & Riccardo DiCecio, 2010. "A flexible finite-horizon alternative to long-run restrictions with an application to technology shock," Working Papers 2005-024, Federal Reserve Bank of St. Louis.
- André Kurmann & Christopher Otrok, 2010.
"News Shocks and the Slope of the Term Structure of Interest Rates,"
Cahiers de recherche
- Andr? Kurmann & Christopher Otrok, 2013. "News Shocks and the Slope of the Term Structure of Interest Rates," American Economic Review, American Economic Association, vol. 103(6), pages 2612-32, October.
- André Kurmann & Christopher Otrok, 2012. "News shocks and the slope of the term structure of interest rates," Working Papers 2012-011, Federal Reserve Bank of St. Louis.
- Christopher Otrok & Andre Kurmann, 2010. "News Shocks and the Slope of the Term Structure of Interest Rates," 2010 Meeting Papers 72, Society for Economic Dynamics.
- Christoph Görtz & John D. Tsoukalas, 2013. "News shocks and business cycles: bridging the gap from different methodologies," Working Papers 2013_25, Business School - Economics, University of Glasgow.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Chapman).
If references are entirely missing, you can add them using this form.