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Asymmetric Cycles

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  • Boyan Jovanovic

Abstract

I estimate a model in which new technology entails random adjustment needs. Rapid adjustments may cause measured productivity to decline. The slow-downs persist because adjustment is costly, and hence protracted. The model explains both the “steepness” and the “deepness” asymmetry of cycles. Adjustment costs amount to about 14% of output and technological inefficiency to about 28%. Firms abandon technologies long before they are perfected—current practice total factor productivity (TFP) is 20% below its maximal level. Copyright 2006, Wiley-Blackwell.

Suggested Citation

  • Boyan Jovanovic, 2006. "Asymmetric Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(1), pages 145-162.
    • Handle: RePEc:oup:restud:v:73:y:2006:i:1:p:145-162
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2006.00372.x
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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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