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Productivity and U.S. Macroeconomic Performance: Interpreting the Past and Predicting the Future with a Two-Sector Real Business Cycle Model

  • Peter N. Ireland

    ()

    (Boston College)

  • Scott Schuh

    ()

    (Federal Reserve Bank of Boston)

A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investment-goods-producing technologies. This model attributes most of the productivity slowdown of the 1970s to the consumption-goods sector; it suggests that a slowdown in the investment-goods sector occurred later and was much less persistent. Against this broader backdrop, the model interprets the more recent episode of robust investment and investment-specific technological change during the 1990s largely as a catch-up in levels that is unlikely to persist or be repeated anytime soon.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 642.

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Date of creation: 01 Apr 2006
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Handle: RePEc:boc:bocoec:642
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