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R&D spending and cyclical fluctuations: putting the "technology" in technology shocks

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  • Alison Butler
  • Michael R. Pakko

Abstract

We examine the dynamic properties of an endogenous growth model with an explicit R&D sector in order to evaluate its ability to propagate temporary disturbances into persistent fluctuations in macroeconomic variables. We demonstrate that a large proportion of the variability and persistence of measured Solow residuals can be thought of as reflecting the endogenous accumulation and adaptation of technical knowledge rather than simply exogenous processes. By explicitly modeling R&D, we use a framework in which it is possible to explicitly consider the role of technology in "technology shocks."

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1998-020.

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Date of creation: 1998
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Handle: RePEc:fip:fedlwp:1998-020

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Keywords: Research and development;

References

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  1. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  2. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-50, June.
  3. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  4. Ingram, B.F. & DeJong, D.N. & Whiteman, C.H. & Wen, Y., 1996. "Cyclical Implications of the Variable Utilization of Physical and Human Capital," Working Papers 96-12, University of Iowa, Department of Economics.
  5. Larry E. Jones & Rodolfo E. Manuelli & Ennio Stacchetti, 2000. "Technology (and policy) shocks in models of endogenous growth," Staff Report 281, Federal Reserve Bank of Minneapolis.
  6. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  7. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  8. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : II. New directions," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 309-341.
  9. Bean, Charles R., 1990. "Endogenous growth and the procyclical behaviour of productivity," European Economic Review, Elsevier, vol. 34(2-3), pages 355-363, May.
  10. S. Rao Aiyagari, 1994. "On the contribution of technology shocks to business cycles," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 22-34.
  11. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, vol. 85(3), pages 492-511, June.
  12. Craig Burnside & Martin Eichenbaum, 1994. "Factor Hoarding and the Propagation of Business Cycles Shocks," NBER Working Papers 4675, National Bureau of Economic Research, Inc.
  13. Charles I. Jones, . "The Upcoming Slowdown in U.S. Economic Growth," Working Papers 97015, Stanford University, Department of Economics.
  14. Perli, Roberto & Sakellaris, Plutarchos, 1998. "Human capital formation and business cycle persistence," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 67-92, June.
  15. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  16. Jordi Gali, 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations," NBER Working Papers 5721, National Bureau of Economic Research, Inc.
  17. Rotemberg, Julio J & Woodford, Michael, 1996. "Real-Business-Cycle Models and the Forecastable Movements in Output, Hours, and Consumption," American Economic Review, American Economic Association, vol. 86(1), pages 71-89, March.
  18. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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Citations

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Cited by:
  1. Michael R. Pakko, 2005. "Changing technology trends, transition dynamics and growth accounting," Working Papers 2000-014, Federal Reserve Bank of St. Louis.
  2. Werner Roeger & Janos Varga & Jan in 't Veld, 2008. "Structural Reforms in the EU: A simulation-based analysis using the QUEST model with endogenous growth," European Economy - Economic Papers 351, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. Werner Roeger & Janos Varga & Jan in 't Veld, 2010. "How to close the productivity gap between the US and Europe: A quantitative assessment using a semi-endogenous growth model," European Economy - Economic Papers 399, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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