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Asymmetric Cycles

  • Boyan Jovanovic

I estimate a model in which new technology entails random adjustment costs. Rapid adjustments may cause productivity slowdowns. These slowdowns last longer when retooling is costly. The model explains why growth-rate disasters are more likely than miracles, and why volatility of growth relates negatively to growth over time. I estimate the model, and the estimates have surprising implications. Firms seem to abandon technologies long before they are perfected current-practice TFP is 17 percent below best-practice.

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File URL: http://www.nber.org/papers/w10573.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10573.

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Date of creation: Jun 2004
Date of revision:
Publication status: published as Jovanovic, Boyan. "Asymmetric Cycles," Review of Economic Studies, 2006, v73(1,Jan), 145-162.
Handle: RePEc:nbr:nberwo:10573
Note: EFG PR
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Garey Ramey & Valerie A. Ramey, 1991. "Technology Commitment and the Cost of Economic Fluctuations," NBER Working Papers 3755, National Bureau of Economic Research, Inc.
  2. 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.
  3. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
  4. Gadi Barlevy, 2004. "The Cost of Business Cycles Under Endogenous Growth," American Economic Review, American Economic Association, vol. 94(4), pages 964-990, September.
  5. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-85, September.
  6. Martin Chalkley & In Ho Lee, 1998. "Learning and Asymmetric Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 623-645, July.
  7. Susanto Basu & David N. Weil, 1996. "Appropriate Technology and Growth," NBER Working Papers 5865, National Bureau of Economic Research, Inc.
  8. Jan Eeckhout & Boyan Jovanovic, 2002. "Knowledge Spillovers and Inequality," American Economic Review, American Economic Association, vol. 92(5), pages 1290-1307, December.
  9. Francois, P. & Lloyd-Ellis, H., 2001. "Animal Spirits Meets Creative Destruction," Discussion Paper 2001-36, Tilburg University, Center for Economic Research.
  10. Lippi, Marco & Reichlin, Lucrezia, 1993. "Diffusion of Technical Change and the Decomposition of Output into Trend and Cycle," CEPR Discussion Papers 775, C.E.P.R. Discussion Papers.
  11. Matsuyama, Kiminori, 1996. "Growing Through Cycles," Economics Series 40, Institute for Advanced Studies.
  12. Ricardo J. Caballero & Mohamad L. Hammour, 1991. "The Cleansing Effect of Recessions," NBER Working Papers 3922, National Bureau of Economic Research, Inc.
  13. Scott, Andrew & Uhlig, Harald, 1999. "Fickle investors: An impediment to growth?," European Economic Review, Elsevier, vol. 43(7), pages 1345-1370, June.
  14. Scott, A. & Acemoglu, D., 1995. "Asymmetric Business Cycles: Theory and Time-series Evidence," Economics Series Working Papers 99173, University of Oxford, Department of Economics.
  15. Martin, Philippe & Rogers, Carol Ann, 1995. "Long-Term Growth and Short-Term Economic Instability," CEPR Discussion Papers 1281, C.E.P.R. Discussion Papers.
  16. Caplin, A. & Leahy, J., 1992. "Business as Usual, Market Crashes, and Wisdom after the Fact," Harvard Institute of Economic Research Working Papers 1594, Harvard - Institute of Economic Research.
  17. Nishimura, Kazuo, 1985. "Competitive equilibrium cycles," Journal of Economic Theory, Elsevier, vol. 35(2), pages 284-306, August.
  18. Diego Comin & Mark Gertler, 2003. "Medium Term Business Cycles," NBER Working Papers 10003, National Bureau of Economic Research, Inc.
  19. Boyan Jovanovic & Yaw Nyarko, 1994. "Learning By Doing and the Choice of Technology," NBER Working Papers 4739, National Bureau of Economic Research, Inc.
  20. Eisfeldt, Andrea L. & Rampini, Adriano A., 2006. "Capital reallocation and liquidity," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 369-399, April.
  21. Forni, Mario & Reichlin, Lucrezia, 1998. "Let's Get Real: A Factor Analytical Approach to Disaggregated Business Cycle Dynamics," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 453-73, July.
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  23. Jovanovic, Boyan & Rob, Rafael, 1987. "Long Waves and Short Waves: Growth Through Intensive and Extensive Search," Working Papers 87-35, C.V. Starr Center for Applied Economics, New York University.
  24. Fatás, Antonio, 1996. "Endogenous Growth and Stochastic Trends," CEPR Discussion Papers 1340, C.E.P.R. Discussion Papers.
  25. repec:dgr:kubcen:200136 is not listed on IDEAS
  26. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June.
  27. Comin, D., 2000. "An Uncertainty-Driven Theory of the Productivity Slowdown: Manufacturing," Working Papers 00-16, C.V. Starr Center for Applied Economics, New York University.
  28. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  29. 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.
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