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What Happens After a Technology Shock?

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  • Lawrence J. Christiano
  • Martin Eichenbaum
  • Robert Vigfusson

Abstract

We provide empirical evidence that a positive shock to technology drives per capita hours worked, consumption, investment, average productivity and output up. This evidence contrasts sharply with the results reported in a large and growing literature that argues, on the basis of aggregate data, that per capita hours worked fall after a positive technology shock. We argue that the difference in results primarily reflects specification error in the way that the literature models the low-frequency component of hours worked.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9819.

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Date of creation: Jul 2003
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Handle: RePEc:nbr:nberwo:9819

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  1. Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05.
  2. Lawrence J. Christiano & Lars Ljungqvist, 1987. "Money does Granger-cause output in the bivariate output-money relation," Staff Report, Federal Reserve Bank of Minneapolis 108, Federal Reserve Bank of Minneapolis.
  3. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, Elsevier, vol. 54(1-3), pages 159-178.
  4. Jinyong Hahn & Jerry Hausman & Guido Kuersteiner, 2005. "Bias Corrected Instrumental Variables Estimation for Dynamic Panel Models with Fixed E¤ects," Boston University - Department of Economics - Working Papers Series, Boston University - Department of Economics WP2005-024, Boston University - Department of Economics.
  5. 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.
  6. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers, Institute for Fiscal Studies W95/17, Institute for Fiscal Studies.
  7. Michele Boldrin & Lawrence J. Christiano & Jonas D.M. Fisher, 1995. "Asset Pricing Lessons for Modeling Business Cycles," NBER Working Papers 5262, National Bureau of Economic Research, Inc.
  8. Graham Elliott & Michael Jansson, . "Testing for Unit Roots with Stationary Covariates," Economics Working Papers, School of Economics and Management, University of Aarhus 2000-6, School of Economics and Management, University of Aarhus.
  9. Jonas Fisher, 2004. "Technology Shocks Matter," Econometric Society 2004 North American Winter Meetings, Econometric Society 14, Econometric Society.
  10. Jordi Galí & Mark Gertler & J. David López-Salido, 2005. "Markups, gaps and the welfare costs of business fluctuations," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 836, Department of Economics and Business, Universitat Pompeu Fabra.
  11. Neville Francis & Valerie A. Ramey, 2002. "Is the Technology-Driven Real Business Cycle Hypothesis Dead?," NBER Working Papers 8726, National Bureau of Economic Research, Inc.
  12. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago WP-97-18, Federal Reserve Bank of Chicago.
  13. Leybourne, S J & McCabe, B P M, 1994. "A Consistent Test for a Unit Root," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 12(2), pages 157-66, April.
  14. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, American Economic Association, vol. 82(3), pages 430-50, June.
  15. Susanto Basu & John Fernald & Miles Kimball, 2002. "Are Technology Improvements Contractionary?," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1986, Harvard - Institute of Economic Research.
  16. Hansen, Bruce E., 1995. "Rethinking the Univariate Approach to Unit Root Testing: Using Covariates to Increase Power," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 11(05), pages 1148-1171, October.
  17. Kilian, L. & Caner, M., 1999. "Size Distortions of Tests of the Null Hypothesis of Stationarity: Evidence and Implications for the PPP Debate," Papers, Michigan - Center for Research on Economic & Social Theory 99-05, Michigan - Center for Research on Economic & Social Theory.
  18. John Shea, 1998. "What Do Technology Shocks Do?," NBER Working Papers 6632, National Bureau of Economic Research, Inc.
  19. Martin S. Eichenbaum & Kenneth J. Singleton, 1986. "Do Equilibrium Real Business Cycle Theories Explain Post-War U.S. Business Cycles?," NBER Working Papers 1932, National Bureau of Economic Research, Inc.
  20. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper Series, Federal Reserve Bank of Chicago WP-01-08, Federal Reserve Bank of Chicago.
  21. Galí, Jordi & Lopez-Salido, Jose David & Vallés Liberal, Javier, 2002. "Technology Shocks and Monetary Policy: Assessing the Fed's Performance," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3211, C.E.P.R. Discussion Papers.
  22. Galí, Jordi, 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1499, C.E.P.R. Discussion Papers.
  23. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, Econometric Society, vol. 65(3), pages 557-586, May.
  24. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, Econometric Society, vol. 58(1), pages 113-44, January.
  25. Lawrence J. Christiano & Martin Eichenbaum, 1989. "Unit Roots in Real GNP: Do We Know, and Do We Care?," NBER Working Papers 3130, National Bureau of Economic Research, Inc.
  26. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," NBER Working Papers 2589, National Bureau of Economic Research, Inc.
  27. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  28. repec:cup:etheor:v:11:y:1995:i:5:p:1148-71 is not listed on IDEAS
  29. DeJong, David N, et al, 1992. "Integration versus Trend Stationarity in Time Series," Econometrica, Econometric Society, Econometric Society, vol. 60(2), pages 423-33, March.
  30. Lawrence J. Christiano & Richard M. Todd, 1996. "Time to plan and aggregate fluctuations," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Win, pages 14-27.
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