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Measures of Technology and the Business Cycle

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  • Alexius, Annika

    (Department of Economics)

  • Carlsson, Mikael

    (Department of Economics)

Abstract

Empirical evidence on the relationship between technology shocks and e.g. hours worked hinges crucially on the identification of the unobservable technological progress. In this paper, we study different measures of technology in order to find out (i) to what extent they capture the same underlying phenomenon and (ii) whether the implications for macroeconomic theory are robust across the approaches. Several versions of the productions function approach and structural VAR models are investigated. Our main finding is that the different technology measures are highly correlated. However, the exact formulation of the identifying restrictions seems to matter for the results. While we replicate the standard finding of a strongly procyclical Solow residual, all other measures of technology are either acyclical or countercyclical.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2002:10.

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Length: 38 pages
Date of creation: 07 May 2002
Date of revision: 02 Mar 2006
Publication status: Published in Review of Economics and Statistics, 2005, pages 299-307.
Handle: RePEc:hhs:uunewp:2002_010

Note: Revised version of the second half of the paper.
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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Related research

Keywords: Technology shocks; productions function approach; strcture VAR models;

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References

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  1. Susanto Basu & Miles S. Kimball, 1997. "Cyclical Productivity with Unobserved Input Variation," NBER Working Papers 5915, National Bureau of Economic Research, Inc.
  2. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Capital Utilization and Returns to Scale," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 67-124 National Bureau of Economic Research, Inc.
  3. Susanto Basu & John Fernald & Miles Kimball, 2002. "Are Technology Improvements Contractionary?," Harvard Institute of Economic Research Working Papers 1986, Harvard - Institute of Economic Research.
  4. Charles R. Nelson & Richard Startz, 1988. "The Distribution of the Instrumental Variables Estimator and Its t-RatioWhen the Instrument is a Poor One," NBER Technical Working Papers 0069, National Bureau of Economic Research, Inc.
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  6. Matthew Shapiro & Mark Watson, 1988. "Sources of Business Cycles Fluctuations," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 111-156 National Bureau of Economic Research, Inc.
  7. Danny Quah & Danny Quah & Shaun P. Vahey, 1995. "Measuring Core Inflation," CEP Discussion Papers dp0254, Centre for Economic Performance, LSE.
  8. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1987. "Stochastic Trends and Economic Fluctuations," NBER Working Papers 2229, National Bureau of Economic Research, Inc.
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  10. Francis, Neville & Ramey, Valerie A., 2005. "Is the technology-driven real business cycle hypothesis dead? Shocks and aggregate fluctuations revisited," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1379-1399, November.
  11. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Warne, A., 1993. "A Common Trends Model: Identification, Estimation and Inference," Papers 555, Stockholm - International Economic Studies.
  13. Susanto Basu & John Fernald, 2000. "Why is productivity procyclical? Why do we care?," Working Paper Series WP-00-11, Federal Reserve Bank of Chicago.
  14. Julio J. Rotemberg & Michael Woodford, 1993. "Dynamic General Equilibrium Models with Imperfectly Competitive Product Markets," NBER Working Papers 4502, National Bureau of Economic Research, Inc.
  15. Carlsson, M., 2000. "Measures of Technology and the Short-Run Responses to Technology Shocks - Is the RBC-Model Consistent with Swedish Manufacturing Data?," Papers 2000-20, Uppsala - Working Paper Series.
  16. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April.
  17. Juan J. Dolado & Juan F. Jimeno, . "The causes of Spanish unemployment: A structural VAR apporach," Working Papers 96-19, FEDEA.
  18. Quah, Danny, 1995. "Measuring Core Inflation," CEPR Discussion Papers 1153, C.E.P.R. Discussion Papers.
  19. Alexius, Annika, 1999. "Sources of Real Exchange Rate Fluctuations in the Nordic Countries," Working Paper Series 90, Sveriges Riksbank (Central Bank of Sweden).
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Citations

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Cited by:
  1. Morten O. Ravn & Saverio Simonelli, 2007. "Labor Market Dynamics and the Business Cycle: Structural Evidence for the United States," Economics Working Papers ECO2007/13, European University Institute.
  2. Holzl, Werner & Reinstaller, Andreas, 2007. "The impact of productivity and demand shocks on structural dynamics: Evidence from Austrian manufacturing," Structural Change and Economic Dynamics, Elsevier, vol. 18(2), pages 145-166, June.
  3. Annika Alexius & Bertil Holmlund, 2007. "Monetary Policy and Swedish Unemployment Fluctuations," CESifo Working Paper Series 2044, CESifo Group Munich.
  4. Andrew Young & William Shughart, 2010. "The consequences of the US DOJ’s antitrust activities: A macroeconomic perspective," Public Choice, Springer, vol. 142(3), pages 409-422, March.
  5. Mikael Carlsson & Jon Smedsaas, 2007. "Technology Shocks and the Labor-Input Response: Evidence from Firm-Level Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(6), pages 1509-1520, 09.
  6. Alexius, Annika & Post, Erik, 2006. "Cointegration and the stabilizing role of exchange rates," Working Paper Series 2006:8, Uppsala University, Department of Economics.
  7. Lundborg, Per, 2005. "Wage Fairness, Growth and the Utilization of R&D Workers," Working Paper Series 206, Trade Union Institute for Economic Research.
  8. Selén, Jan & Ståhlberg, Ann-Charlotte, 2004. "Wage and Compensation Inequality — How Different?," Working Paper Series 197, Trade Union Institute for Economic Research.
  9. Lundborg, Per, 2005. "Wage Theories for the Swedish Labour Market," Working Paper Series 207, Trade Union Institute for Economic Research.
  10. Alexius, Annika & Post, Erik, 2005. "Exchange Rates and Asymmetric Shocks in Small Open Economies," Working Paper Series 2005:10, Uppsala University, Department of Economics.
  11. Alexius, Annika, 2005. "Productivity shocks and real exchange rates," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 555-566, April.

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