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The Solow Residual for Australia: Technology Shocks or Factor Utilization?

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  • Otto, Glenn

Abstract

This paper presents evidence that implies that fluctuations in the Solow residual for Australia do not solely reflect technology shocks. Recent work suggests that the Solow residual is a noisy measure of technology shocks. One source of noise in the standard measure of the Solow residual is changes in factor utilization. In this paper, a structural vector autoregression model for capacity utilization and the Solow residual is estimated. A transitory shock is identified that accounts for about 30 percent of the short term variation in the Solow residual and virtually 100 percent of the variation in capacity utilization at all horizons. Copyright 1999 by Oxford University Press.

Suggested Citation

  • Otto, Glenn, 1999. "The Solow Residual for Australia: Technology Shocks or Factor Utilization?," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 136-153, January.
  • Handle: RePEc:oup:ecinqu:v:37:y:1999:i:1:p:136-53
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    Cited by:

    1. Gabor Korosi & Laszlo Halpern, 2000. "Efficiency and Market Share in Hungarian Corporate Sector," IEHAS Discussion Papers 0009, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    2. Meredith Beechey & Pär Österholm, 2008. "A Bayesian Vector Autoregressive Model with Informative Steady-state Priors for the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 84(267), pages 449-465, December.
    3. John Simon, 2001. "The Decline in Australian Output Volatility," RBA Research Discussion Papers rdp2001-01, Reserve Bank of Australia.
    4. Sangho Kim, 2014. "Estimating Productivity Growth In The Korean Economy Without Restrictive Assumptions," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 520-532, April.
    5. Katharine Neiss & Edward Nelson, 2002. "Inflation dynamics, marginal cost, and the output gap: evidence from three countries," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    6. Hyunjoon Lim & Sangho Kim, 2004. "Does the Solow Residual for Korea Reflect Pure Technology Shocks?," Econometric Society 2004 Far Eastern Meetings 777, Econometric Society.
    7. Dungey, Mardi & Pagan, Adrian, 2000. "A Structural VAR Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 321-342, December.

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