Stochastic Technical Progress, Nearly Smooth Trends and Distinct Business Cycles
This paper investigates whether it is possible to entertain simultaneously two attractive views about US GDP. The first is that long term growth in US GDP is attributable to an empirically plausible specification of random technical progress. The second is that deviations of GDP from a fitted smooth 'trend' are mostly attributable to shocks that have only temporary effects, so that they are unrelated to the shocks to technical progress that lead to long term growth. The paper shows that these two views are not incompatible by constructing a model where stochastic technical progress (whose properties are calibrated to fit some features of US data) has essentially no effect on suitably detrended time series of GDP. The paper also studies variations in wedges between price and marginal cost that are capable of giving rise to these transitory movements.
|Date of creation:||May 2002|
|Date of revision:|
|Publication status:||published as Rotemberg, Julio J. "Stochastic Technical Progress, Smooth Trends, And Nearly Distinct Business Cycles," American Economic Review, 2003, v93(5,Dec), 1543-1559.|
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- 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.
- Jordi Galí & Mark Gertler & J. David López-Salido, 2005.
"Markups, gaps and the welfare costs of business fluctuations,"
Economics Working Papers
836, Department of Economics and Business, Universitat Pompeu Fabra.
- Jordi Galí & Mark Gertler & J. David López-Salido, 2007. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 44-59, November.
- Galí, Jordi & Gertler, Mark & Lopez-Salido, Jose David, 2002. "Markups, Gaps and the Welfare Costs of Business Fluctuations," CEPR Discussion Papers 3212, C.E.P.R. Discussion Papers.
- Galí, Jordi & Gertler, Mark & Lopez-Salido, Jose David, 2003. "Mark-ups, Gaps and the Welfare Costs of Business Fluctuations," CEPR Discussion Papers 4134, C.E.P.R. Discussion Papers.
- Jordi Gali & Mark Gertler & J. David Lopez-Salido, 2002. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," NBER Working Papers 8850, National Bureau of Economic Research, Inc.
- Jordi Galí & Mark Gertler & J. David López-Salido, 2003. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," Working Papers 45, Barcelona Graduate School of Economics.
- Jordi Galí & Mark Gertler & J. David López-Salido, 2002. "Markups, gaps, and the welfare costs of business fluctuations," Banco de Espa�a Working Papers 0204, Banco de Espa�a.
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