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Technology Shocks Matter

  • Jonas Fisher

This paper uses the neoclassical growth model to identify the effects of technological change on the US business cycle. In the model there are two sources of technological change: neutral, which affects the production of all goods homogeneously, and investment-specific. Investment-specific shocks are the unique source of the secular trend in the real price of investment goods, while shocks to both kinds of technology are the only factors which affect labor productivity in the long run. Consistent with previous empirical work which considers only neutral shocks, the results suggest these shocks account for little, about 6 percent, of the business cycle variation in hours worked. In contrast, investment-specific shocks account for about 48 percent, a new finding which suggests that technology shocks are an important source of the business cycle

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Paper provided by Econometric Society in its series Econometric Society 2004 North American Winter Meetings with number 14.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nawm04:14
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