Productivity and U.S. Macroeconomic Performance: Interpreting the Past and Predicting the Future with a Two-Sector Real Business Cycle Model

Productivity and U.S. Macroeconomic Performance: Interpreting the Past and Predicting the Future with a Two-Sector Real Business Cycle Model

Peter Ireland () and Scott Schuh ()
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Scott Schuh: Federal Reserve Bank of Boston

No 642, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investment-goods-producing technologies. This model attributes most of the productivity slowdown of the 1970s to the consumption-goods sector; it suggests that a slowdown in the investment-goods sector occurred later and was much less persistent. Against this broader backdrop, the model interprets the more recent episode of robust investment and investment-specific technological change during the 1990s largely as a catch-up in levels that is unlikely to persist or be repeated anytime soon.

Keywords: productivity; real business cycle (search for similar items in EconPapers)
JEL-codes: E32 O41 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge, nep-eff and nep-mac
Date: 2006-04-01
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