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Split Personalities: The Changing Nature of Technology Shocks*

Christoph Görtz, Christopher Gunn and Thomas Lubik
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Thomas Lubik: Federal Reserve Bank of Richmond,

No 22-06, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: This paper analyzes the nature of technology shocks and documents important changes in their propagation over time. We employ a vector-autoregression and identify a shock that explains the maximum variation in total factor productivity (TFP) at a long finite horizon. This agnostic identification suggests that the dominant shock driving TFP is not necessarily a surprise shock, but exhibits features consistent with a shock that is anticipated or diffuses over time: GDP and consumption rise prior to any significant increase in TFP. We further find that shock transmission has changed over time. In a sample that ends in the mid 1980s, the shock triggers a decline in hours-worked and inventories, and a rise in credit spreads. In a post-Great Inflation sample the response of these variables is reversed and the shock generates an outright expansion in hours, inventories, GDP and consumption that is accompanied by a decline in credit spreads. We find that the importance of technology shocks as a major driver of aggregate fluctuations has increased over time - they play a dominant role in the second subsample, but much less so in the first.

Keywords: technology shocks; total factor productivity; business cycles; shock transmission. (search for similar items in EconPapers)
JEL-codes: E2 E3 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2022-06-12
New Economics Papers: this item is included in nep-fdg and nep-his
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Published: Carleton Economics Working Papers

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