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Revisions in Utilization-Adjusted TFP and Robust Identification of News Shocks

Author

Listed:
  • André Kurmann

    (Drexel University)

  • Eric Sims

    (University of Notre Dame and NBER)

Abstract

This paper documents large revisions in a widely used series of utilization-adjusted total factor productivity (TFP) by Fernald (2014) and shows that these revisions can materially affect empirical results about the effects of news shocks. We trace these revisions to changes in estimated factor utilization that are evocative of cyclical measurement issues with productivity. We propose an alternative identification that is robust to these measurement issues. Applied to U.S. data, the shock predicts delayed productivity growth while simultaneously generating strong responses of novel indicators of technological innovation and forward-looking variables. The shock does not lead to comovement in macroeconomic aggregates.

Suggested Citation

  • André Kurmann & Eric Sims, 2021. "Revisions in Utilization-Adjusted TFP and Robust Identification of News Shocks," The Review of Economics and Statistics, MIT Press, vol. 103(2), pages 216-235, May.
    • Handle: RePEc:tpr:restat:v:103:y:2021:i:2:p:216-235
    DOI: 10.1162/rest_a_00896
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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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