Technology Shocks in a Two-Sector DSGE Model
AbstractRecent evidence suggests that output, consumption, investment and hours rise in response to improvements in the technology for producing consumption goods, but all decline on impact when there is a similar improvement in investment-goods technology. We show that these effects are consistent with the predictions of a dynamic stochastic general equilibrium (DSGE) model with two sectors---a consumption good sector and an investment good sector---with sticky prices in each sector. The assumption that investment goods prices are also costly to adjust differentiates our model from previous research in this area, and helps us fit the evidence that the relative price of investment goods adjusts slowly to shocks. In combination with recent empirical work, our paper suggests that sector-specific technology shocks may be a major source of US business cycle dynamics, and models that were developed to fit the estimated effects of monetary policy shocks can also explain the estimated effects of sector-specific technology shocks.
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 Society for Economic Dynamics in its series 2012 Meeting Papers with number 1017.
Date of creation: 2012
Date of revision:
Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
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.:
- Annette Vissing-Jorgensen, 2002. "Limited Asset Market Participation and the Elasticity of Intertemporal Substitution," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 825-853, August.
- Alejandro Justiniano & Giorgio Primiceri & Andrea Tambalotti, 2011.
"Investment Shocks and the Relative Price of Investment,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 101-121, January.
- Justiniano, Alejandro & Primiceri, Giorgio E. & Tambalotti, Andrea, 2009. "Investment Shocks and the Relative Price of Investment," CEPR Discussion Papers 7598, C.E.P.R. Discussion Papers.
- Alejandro Justiniano & Giorgio Primiceri & Andrea Tambalotti, 2010. "Code and data files for "Investment Shocks and the Relative Price of Investment"," Computer Codes 09-248, Review of Economic Dynamics.
- Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2009. "Investment shocks and the relative price of investment," Staff Reports 411, Federal Reserve Bank of New York.
- Giorgio E. Primiceri & Andrea Tambalotti & Alejandro Justiniano, 2009. "Investment Shocks and the Relative Price of Investment," 2009 Meeting Papers 686, Society for Economic Dynamics.
- Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
- Michael P. Keane & Richard Rogerson, 2011.
"Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective,"
NBER Working Papers
17430, National Bureau of Economic Research, Inc.
- Michael Keane & Richard Rogers, 2012. "Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective," Economics Series Working Papers 2012-W12, University of Oxford, Department of Economics.
- Michael P. Keane & Richard Rogerson, 2012. "Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective," Economics Papers 2012-W12, Economics Group, Nuffield College, University of Oxford.
- Annette Vissing-Jorgensen, 2002. "Limited Asset Market Participation and the Elasticity of Intertemporal Substitution," NBER Working Papers 8896, National Bureau of Economic Research, Inc.
- Basu, Susanto & Fernald, John G, 1997.
"Returns to Scale in U.S. Production: Estimates and Implications,"
Journal of Political Economy,
University of Chicago Press, vol. 105(2), pages 249-83, April.
- Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
If references are entirely missing, you can add them using this form.