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Technology and non-technology shocks in a two-sector economy

  • Francesco Busato

    (University of Naples Parthenope and University of Aarhus, School of Economics and Managements)

  • Alessandro Girardi

    (ISAE - Institute for Studies and Economic Analyses and University of Rome Tor Vergata)

  • Amedeo Argentiero

    (University of Rome Tor Vergata)

This paper presents an empirically testable two-sector dynamic general equilibrium model for the United States economy that admits technology and non-technology shocks. Long-run identification restrictions further distinguish the impact of each shocks over the originating sector (i.e. as a sector-specific shock), and over other sectors different from the originating one (i.e. as a crosssector shock), also exploring the shocks transmission mechanism across sectors. There are three main results. First, business cycles are mainly generated, in each sector, by technology shocks (primarily described by sector-specific shocks), but they are transmitted across sectors along the sectors’ demand side, i.e. passing through non-technology shocks. Second, technology and nontechnology shocks almost equally share the responsibility of fluctuations in the aggregate manufacturing sector. Third, the aggregate dynamics is driven by the relatively larger sector which is the non-durable good one.

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Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 96.

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Length: 50 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:isa:wpaper:96
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