Unobserved Factor Utilization, Technology Shocks and Business Cycles

Domenico J. Marchetti () and Francesco Nucci
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Domenico J. Marchetti: Banca d'Italia

No 392, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We derive a measure of technological change using firm-level panel data and controlling for imperfect competition, increasing returns and unobserved factor utilization. We show that the latter variable accounts for a relevant portion of the cyclicality of the Solow residual. Our key finding is that technological shocks result in a contraction of inputs on impact. Whilst this result is hard to reconcile with the transmission mechanism of real business cycle models, it is consistent with simple sticky-price models. Using survey information on the frequency and size of price revisions, we show that the evidence on the contractionary effects of technology shocks is indeed much stronger for firms with stickier prices.

Keywords: factor hoarding; technology shocks; business cycles (search for similar items in EconPapers)
JEL-codes: D24 E32 (search for similar items in EconPapers)
Date: 2001-02
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_392_01

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