IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Technology shocks matter

  • Jonas D. M. 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 effects 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.chicagofed.org/digital_assets/publications/working_papers/2002/wp2002-14.pdf
Download Restriction: no

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-02-14.

as
in new window

Length:
Date of creation: 2002
Date of revision:
Handle: RePEc:fip:fedhwp:wp-02-14
Contact details of provider: Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834
Phone: 312/322-5111
Fax: 312/322-5515
Web page: http://www.chicagofed.org/
Email:


More information through EDIRC

Order Information: Web: http://www.chicagofed.org/webpages/publications/print_publication_order_form.cfm Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
  2. Lutz Kilian, 1999. "Finite-Sample Properties of Percentile and Percentile-t Bootstrap Confidence Intervals for Impulse Responses," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 652-660, November.
  3. Basu, Susanto & Fernald, John G., 2002. "Aggregate productivity and aggregate technology," European Economic Review, Elsevier, vol. 46(6), pages 963-991, June.
  4. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
  5. Matthew Shapiro & Mark Watson, 1988. "Sources of Business Cycles Fluctuations," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 111-156 National Bureau of Economic Research, Inc.
  6. Galí, Jordi & Lopez-Salido, Jose David & Vallés Liberal, Javier, 2002. "Technology Shocks and Monetary Policy: Assessing the Fed's Performance," CEPR Discussion Papers 3211, C.E.P.R. Discussion Papers.
  7. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007 Elsevier.
  8. Michael Gort & Jeremy Greenwood & Peter Rupert, 1999. "Measuring the Rate of Technological Progress in Structures," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 207-230, January.
  9. Gali, J., 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," Working Papers 96-28, C.V. Starr Center for Applied Economics, New York University.
  10. Kongsamut, Piyabha & Rebelo, Sérgio & Xie, Danyang, 1997. "Beyond Balanced Growth," CEPR Discussion Papers 1693, C.E.P.R. Discussion Papers.
  11. Lawrence J. Christiano & Michele Boldrin & Jonas D. M. Fisher, 2001. "Habit Persistence, Asset Returns, and the Business Cycle," American Economic Review, American Economic Association, vol. 91(1), pages 149-166, March.
  12. Glenn D. Rudebusch, 2002. "Assessing the Lucas critique in monetary policy models," Working Paper Series 2002-02, Federal Reserve Bank of San Francisco.
  13. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  14. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
  15. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 372-75, November.
  16. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Staff Report 102, Federal Reserve Bank of Minneapolis.
  17. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
  18. Jonas D.M. Fisher, 1999. "The new view of growth and business cycles," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 35-56.
  19. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1987. "Stochastic Trends and Economic Fluctuations," NBER Working Papers 2229, National Bureau of Economic Research, Inc.
  20. Lawrence J. Christiano & Jonas D.M. Fisher, 1998. "Stock market and investment good prices: implications of macroeconomics," Working Paper Series WP-98-6, Federal Reserve Bank of Chicago.
  21. Christopher A. Sims & Tao Zha, 1999. "Error Bands for Impulse Responses," Econometrica, Econometric Society, vol. 67(5), pages 1113-1156, September.
  22. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1989. "Building Blocks of Market Clearing Business Cycle Models," NBER Working Papers 3004, National Bureau of Economic Research, Inc.
  23. Jeffrey R. Campbell, 1997. "Entry, Exit, Embodied Technology, and Business Cycles," NBER Working Papers 5955, National Bureau of Economic Research, Inc.
  24. Susanto Basu & John Fernald, 2001. "Why Is Productivity Procyclical? Why Do We Care?," NBER Chapters, in: New Developments in Productivity Analysis, pages 225-302 National Bureau of Economic Research, Inc.
  25. Lutz Kilian, 1998. "Small-Sample Confidence Intervals For Impulse Response Functions," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 218-230, May.
  26. Fisher, Jonas D. M., 1997. "Relative prices, complementarities and comovement among components of aggregate expenditures," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 449-474, August.
  27. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What happens after a technology shock?," International Finance Discussion Papers 768, Board of Governors of the Federal Reserve System (U.S.).
  28. McGrattan, Ellen R., 1994. "The macroeconomic effects of distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 573-601, June.
  29. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1998. "The Role of Investment-Specific Technological Change in the Business Cycle," RCER Working Papers 449, University of Rochester - Center for Economic Research (RCER).
  30. Fernandez, Roque B, 1981. "A Methodological Note on the Estimation of Time Series," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 471-76, August.
  31. Fernando Alvarez & Urban J. Jermann, 2005. "Using Asset Prices to Measure the Persistence of the Marginal Utility of Wealth," Econometrica, Econometric Society, vol. 73(6), pages 1977-2016, November.
  32. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  33. Jeffrey R. Campbell, 1997. "Computational Appendix to Entry, Exit, Embodied Technology, and Business Cycles," Technical Appendices campbell98, Review of Economic Dynamics.
  34. Lawrence J. Christiano & Jonas D. M. Fisher, 2003. "Stock Market and Investment Goods Prices: Implications for Macroeconomics," NBER Working Papers 10031, National Bureau of Economic Research, Inc.
  35. Neville Francis & Valerie A. Ramey, 2002. "Is the Technology-Driven Real Business Cycle Hypothesis Dead?," NBER Working Papers 8726, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. Canadian Macro Study Group

When requesting a correction, please mention this item's handle: RePEc:fip:fedhwp:wp-02-14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernie Flores)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.