Decomposing the Cyclical Movements in the Real Price of Equipment

Kwang Hwan Kim ()
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Kwang Hwan Kim: Dongguk University

East Asian Economic Review, 2009, vol. 13, issue 1, 41-55

Abstract: This paper raises warning flags about the current use of the real price of equipment as the driving process for investment-specific technology in the Real-Business-Cycle (RBC) model. Using a structural VAR approach, this paper finds that a significant fraction of the real price of equipment is accounted for by other shocks besides investment-specific technology shocks (I-shocks). This finding indicates that the current RBC models which use the real price of equipment as the driving process of investment-specific technology might overstate the contribution of I-shocks to economic fluctuations.

Keywords: Investment-Specific Technology Shock; Real Price of Equipment; Structural VAR (search for similar items in EconPapers)
JEL-codes: E22 E32 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:0123

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