Business Cycle Accounting-How important are technology shocks as a propagation mechanism? Some new evidence from Japan
This paper investigates the role of technology shocks as a propagation mechanism for business cycles using the new technique of business cycle accounting (BCA) and some new evidence from Japan. BCA technique enables us to model the economy as a standard growth model, but extends it to allow multiple propagation channels (referred to as wedges). Applying it to Japan during the period 1980 to 2000, I find that though technology shocks play an important role in propagating market frictions, they are by no means enough to account for the observed economic fluctuations. Investment wedges play a major role, something that standard RBC models fail to recognize and consequently tends to overemphasize the role of technology shocks.
|Date of creation:||02 Aug 2005|
|Date of revision:|
|Note:||Type of Document - pdf; pages: 29. This paper was previously circulated as 'Accounting for the Lost Decade in Japan'|
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- Kydland, Finn E & Prescott, Edward C, 1982.
"Time to Build and Aggregate Fluctuations,"
Econometric Society, vol. 50(6), pages 1345-70, November.
- Finn E. Kydland & Edward C. Prescott, 1982. "Executable program for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4, Quantitative Macroeconomics & Real Business Cycles.
- Finn E. Kydland & Edward C. Prescott, 1982. "Web interface for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4a, Quantitative Macroeconomics & Real Business Cycles.
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