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R&D spending and cyclical fluctuations: putting the "technology" in technology shocks

  • Alison Butler
  • Michael R. Pakko

We examine the dynamic properties of an endogenous growth model with an explicit R&D sector in order to evaluate its ability to propagate temporary disturbances into persistent fluctuations in macroeconomic variables. We demonstrate that a large proportion of the variability and persistence of measured Solow residuals can be thought of as reflecting the endogenous accumulation and adaptation of technical knowledge rather than simply exogenous processes. By explicitly modeling R&D, we use a framework in which it is possible to explicitly consider the role of technology in "technology shocks."

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1998-020.

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Date of creation: 1998
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Handle: RePEc:fip:fedlwp:1998-020
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  1. 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.
  2. 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.
  3. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  4. David N. DeJong & Beth F. Ingram & Yi Wen & Charles H. Whiteman, 1996. "Cyclical Implications of the Variable Utilization of Physical and Human Capital," Macroeconomics 9609004, EconWPA.
  5. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
  6. Craig Burnside & Martin Eichenbaum, 1994. "Factor Hoarding and the Propagation of Business Cycles Shocks," NBER Working Papers 4675, National Bureau of Economic Research, Inc.
  7. Rotemberg, Julio J & Woodford, Michael, 1996. "Real-Business-Cycle Models and the Forecastable Movements in Output, Hours, and Consumption," American Economic Review, American Economic Association, vol. 86(1), pages 71-89, March.
  8. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, vol. 85(3), pages 492-511, June.
  9. S. Rao Aiyagari, 1994. "On the contribution of technology shocks to business cycles," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 22-34.
  10. Charles I. Jones, . "The Upcoming Slowdown in U.S. Economic Growth," Working Papers 97015, Stanford University, Department of Economics.
  11. Larry E. Jones & Rodolfo E. Manuelli & Ennio Stacchetti, 1999. "Technology (and Policy) Shocks in Models of Endogenous Growth," NBER Working Papers 7063, National Bureau of Economic Research, Inc.
  12. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : II. New directions," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 309-341.
  13. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  14. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-50, June.
  15. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  16. Bean, Charles R., 1990. "Endogenous growth and the procyclical behaviour of productivity," European Economic Review, Elsevier, vol. 34(2-3), pages 355-363, May.
  17. Perli, Roberto & Sakellaris, Plutarchos, 1998. "Human capital formation and business cycle persistence," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 67-92, June.
  18. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  19. Benhabib, Jess & Perli, Roberto & Sakellaris, Plutarchos, 1997. "Persistence of Business Cycles in Multisector RBC Models," Working Papers 97-19, C.V. Starr Center for Applied Economics, New York University.
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