Computerizing Households and the Role of Investment-Specific Productivity in Business Cycles

Seunghoon Na and Hyunseung Oh

No 1292, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Advancements in computer technology have reshaped not only business operations but also household consumption. We estimate a business-cycle model disaggregating consumer IT and non-IT durable goods from the capital stock. We find that shocks to the supply of IT durables account for more than half of the variation in house- holds' real expenditure on IT durables. Furthermore, investment-specific productivity shocks drove nearly half of the rapid growth in household durable expenditures during the 2000s. Nonetheless, they have small influence over output dynamics, because unlike business investment goods, consumer durables do not add to the productive capital of the economy. The shocks become important when household IT goods are complementary to firms' capital, such as when online services are provided through consumers' smartphones.

Keywords: Investment; Durables; Investment-specific productivity (search for similar items in EconPapers)
JEL-codes: E22 E32 E37 (search for similar items in EconPapers)
Pages: 30
Date: 2020-07-09
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1292

DOI: 10.17016/IFDP.2020.1292

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