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The Role of Investment-Specific Technological Change in the Business Cycle

  • Greenwood, J.
  • Hercowitz, Z.
  • Krusell, P.

This is a specific investigation of the importance of technological change specific to new investment goods for postwar U.S. aggregate fluctuations. A growth model that incorporates this form of technological change is calibrated to U.S. data and simulated, using the relative price of new equipment to identify the process driving investment-specific technology shocks. The analysis suggests that this form of technological change is the source of about 30 percent output fluctuations.

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Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 449.

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Length: 26 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:roc:rocher:449
Contact details of provider: Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

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  1. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  2. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  3. Andreas Hornstein & Jack Praschnik, 1997. "Intermediate inputs and sectoral comovement in the business cycle," Working Paper 97-06, Federal Reserve Bank of Richmond.
  4. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  5. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
  6. Charles L. Evans, 1991. "Productivity shocks and real business cycles," Working Paper Series, Macroeconomic Issues 91-22, Federal Reserve Bank of Chicago.
  7. Burnside, Craig & Eichenbaum, Martin, 1996. "Factor-Hoarding and the Propagation of Business-Cycle Shocks," American Economic Review, American Economic Association, vol. 86(5), pages 1154-74, December.
  8. Lawrence J. Christiano & Jonas Fisher, 1995. "Tobin's q and Asset Returns: Implications for Business Cycle Analysis," NBER Working Papers 5292, National Bureau of Economic Research, Inc.
  9. 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.
  10. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  11. Kydland, Finn E. & Prescott, Edward C., 1988. "The workweek of capital and its cyclical implications," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 343-360.
  12. Huffman, Gregory W. & Wynne, Mark A., 1999. "The role of intratemporal adjustment costs in a multisector economy," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 317-350, April.
  13. 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.
  14. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  15. Thomas F. Cooley & Gary D. Hansen & Edward C. Prescott, 1994. "Equilibrium business cycles with idle resources and variable capacity utilization," Working Papers 94-22, Federal Reserve Bank of Philadelphia.
  16. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
  17. Finn, Mary G., 1995. "Variance properties of Solow's productivity residual and their cyclical implications," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1249-1281.
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