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

Suparna Chakraborty

Macroeconomics from EconWPA

Abstract: 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.

Keywords: business cycle accounting; wedges; propagation mechanism; technology; aggregate fluctuations; japan (search for similar items in EconPapers)
JEL-codes: E (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-sea
Date: 2005-08-02
Note: Type of Document - pdf; pages: 29. This paper was previously circulated as 'Accounting for the Lost Decade in Japan'
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0508002

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