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Measures of Technology and the Business Cycle: Evidence from Sweden and the U.S

  • Alexius, Annika

    (Trade Union Institute for Economic Research)

  • Carlsson, Mikael

    (Department of Economics)

Empirical evidence on the cyclical behavior of technology shocks, or the relative importance of technology shocks versus other structural shocks as sources of fluctuations, hinges crucially on the identification of technological changes. In this paper, we study different measures of technology in order to find out (i) to what extent they capture the same underlying phenomenon and (ii) whether the implications for macroeconomic theory vary between approaches. Several variations of the production function approach and structural VAR models are investigated: the classic Solow residual, the refined Solow residuals of Burnside et al (1995) and Basu and Kimball (1997), large cointegrated VAR models as in King et al (1991) and a small VAR in first differences à la Galí (1999). It turns out that the different measures of technological change are reasonably coherent when applied to US data. However, they are often insignificantly related in the case of Sweden. Furthermore, our results do not support the hypothesis that business cycle fluctuations are primarily drive by changes in technology.

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Paper provided by Trade Union Institute for Economic Research in its series Working Paper Series with number 174.

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Length: 47 pages
Date of creation: 28 Dec 2001
Date of revision:
Handle: RePEc:hhs:fiefwp:0174
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  1. Susanto Basu & John Fernald & Miles Kimball, 1998. "Are technology improvements contractionary?," International Finance Discussion Papers 625, Board of Governors of the Federal Reserve System (U.S.).
  2. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Susanto Basu & John Fernald, 2000. "Why is productivity procyclical? Why do we care?," Working Paper Series WP-00-11, Federal Reserve Bank of Chicago.
  4. John H. Rogers, 1998. "Monetary shocks and real exchange rates," International Finance Discussion Papers 612, Board of Governors of the Federal Reserve System (U.S.).
  5. Susanto Basu & Miles S. Kimball, 1997. "Cyclical Productivity with Unobserved Input Variation," NBER Working Papers 5915, National Bureau of Economic Research, Inc.
  6. Burnside, C & Eichenbaum, M & Rebelo, S, 1995. "Capital Utilization and Returns to Scale," RCER Working Papers 402, University of Rochester - Center for Economic Research (RCER).
  7. Warne, A., 1993. "A Common Trends Model: Identification, Estimation and Inference," Papers 555, Stockholm - International Economic Studies.
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  9. Clarida, Richard & Gali, Jordi, 1994. "Sources of real exchange-rate fluctuations: How important are nominal shocks?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 1-56, December.
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  12. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October.
  13. Susanto Basu & John G. Fernald, 1997. "Aggregate productivity and aggregate technology," International Finance Discussion Papers 593, Board of Governors of the Federal Reserve System (U.S.).
  14. Julio J. Rotemberg & Michael Woodford, 1993. "Dynamic General Equilibrium Models with Imperfectly Competitive Product Markets," NBER Working Papers 4502, National Bureau of Economic Research, Inc.
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  16. Carlsson, M., 2000. "Measures of Technology and the Short-Run Responses to Technology Shocks - Is the RBC-Model Consistent with Swedish Manufacturing Data?," Papers 2000-20, Uppsala - Working Paper Series.
  17. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  18. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April.
  19. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
  20. Nordström Skans, Oskar, 2001. "The effects of working time reductions on wages, actual hours and equilibrium unemployment," Working Paper Series 2001:8, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  21. Gert Wehinger, 2000. "Causes of Inflation in Europe, the United States and Japan: Some Lessons for Maintaining Price Stability in the EMU from a Structural VAR Approach," Empirica, Springer, vol. 27(1), pages 83-107, March.
  22. Dolado, Juan J. & Jimeno, Juan F., 1997. "The causes of Spanish unemployment: A structural VAR approach," European Economic Review, Elsevier, vol. 41(7), pages 1281-1307, July.
  23. Trejo, Stephen J, 1993. "Overtime Pay, Overtime Hours, and Labor Unions," Journal of Labor Economics, University of Chicago Press, vol. 11(2), pages 253-78, April.
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