Technology Shocks and Business Cycle: An Analysis Based on the Malmquist Index
Mark Lee ()
No 2009-04, Working Papers from Towson University, Department of Economics
The goal of this study examines the quantitative implications of the Malmquist index in a standard Real Business Cycle (RBC) model as a measure of technology shock. To achieve this, the paper first investigates the empirical validity of the equivalence proposition on the two technology shock measures: a relatively new Malmquist Index and the predominant Solow residual. On the basis of permutation tests, this paper shows the observational equivalence of the two measures. Then, the role of technology shock measured by the Malmquist index in the RBC model is examined. The study uncovers that the RBC model with the Malmquist index successfully replicates the stylized U.S. business cycle features documented in the existing literature. Finally, this paper discusses potential benefits of the Malmquist index in the business cycle studies.
Keywords: Malmquist Index; Observational Equivalence; Solow Residual; RBC Model; Aggregate Technology Shocks. (search for similar items in EconPapers)
JEL-codes: E32 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-dge
Date: 2009-12, Revised 2009-12
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Persistent link: http://EconPapers.repec.org/RePEc:tow:wpaper:2009-04
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