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Business Cycle Accounting-How important are technology shocks as a propagation mechanism? Some new evidence from Japan

  • Suparna Chakraborty

    (University of Minnesota)

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.

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File URL: http://128.118.178.162/eps/mac/papers/0508/0508002.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0508002.

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Length: 29 pages
Date of creation: 02 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0508002
Note: Type of Document - pdf; pages: 29. This paper was previously circulated as 'Accounting for the Lost Decade in Japan'
Contact details of provider: Web page: http://128.118.178.162

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  1. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
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