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Unobserved Factor Utilization, Technology Shocks and Business Cycles

  • Domenico J. Marchetti

    ()

    (Banca d'Italia)

  • francesco Nucci

    ()

    (Universit� di Roma "La Sapienza")

We derive a measure of technological change using firm-level panel data and controlling for imperfect competition, increasing returns and unobserved factor utilization. We show that the latter variable accounts for a relevant portion of the cyclicality of the Solow residual. Our key finding is that technological shocks result in a contraction of inputs on impact. Whilst this result is hard to reconcile with the transmission mechanism of real business cycle models, it is consistent with simple sticky-price models. Using survey information on the frequency and size of price revisions, we show that the evidence on the contractionary effects of technology shocks is indeed much stronger for firms with stickier prices.

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File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2001/2001-0392/tema_392.pdf
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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 392.

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Date of creation: Feb 2001
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Handle: RePEc:bdi:wptemi:td_392_01
Contact details of provider: Postal: Via Nazionale, 91 - 00184 Roma
Web page: http://www.bancaditalia.it

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  1. Luigi Guiso & Fabiano Schivardi, 2000. "Information Spillovers and Factor Adjustment," Temi di discussione (Economic working papers) 368, Bank of Italy, Economic Research and International Relations Area.
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