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Total factor productivity and the propagation of shocks: Empirical evidence and implications for the business cycle

Listed author(s):
  • Mayer, Eric
  • Rüth, Sebastian
  • Scharler, Johann

Using a robust sign restrictions approach, we study the response of total factor productivity (TFP) to structural shocks in a VAR framework. We find that TFP increases in response to adverse supply, demand, and wage mark-up shocks. Results for monetary policy shocks are insignificant. Following an adverse technology shock and reductions in government spending, TFP declines. Overall, we conclude that TFP fluctuates endogenously over the business cycle, a feature of the data that is not present in standard DSGE models.

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File URL: http://www.sciencedirect.com/science/article/pii/S0164070416301550
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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 50 (2016)
Issue (Month): C ()
Pages: 335-346

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Handle: RePEc:eee:jmacro:v:50:y:2016:i:c:p:335-346
DOI: 10.1016/j.jmacro.2016.11.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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