Technology Innovations and the Volatility of Output: An International Perspective

Christian Zimmermann

No 34, Cahiers de recherche CREFE / CREFE Working Papers from CREFE, Université du Québec à Montréal

Abstract: This paper aims at improving the measure of how much of the business cycle can be explained by technology innovations. For this, we measure the Solow residuals and calibrate a two country real business cycle model for 19 economies. A new procedure is used to determine the elasticity of substitution between domestic and foreign goods, giving for most of the economies a higher elasticity than commonly measured. Another finding is that technology innovations explain more of the business cycle in an open economy model than in a closed economy one. The key result is that the volatility of output is higher in the simulations than in the data for most of the economies, contrarily to common belief.

Cette étude vise à améliorer la proportion du cycle conjoncturel explicable par des innovations technologiques. À cet effet, nous mesurons des résidus de Solow et calibrons un modèle du cycle réel à deux pays pour 19 économies. Une nouvelle procédure est utilisée pour déterminer l'élasticité de substitution entre biens domestique et étranger, menant pour la plupart des économies à une élasticité plus élevée que la valuer standard. Un autre résultat est qu'ouvrir une économie permet d'expliquer une plus grande partie du cycle. Le résultat principal est que l'amplitude du cycle est plus forte dans les simulations que dans les données pour la grande majorité des économies, au contraire de la croyance usuelle.

Keywords: open economy macroeconomics; real business cycle models (search for similar items in EconPapers)
JEL-codes: E32 F41 (search for similar items in EconPapers)
Pages: 25 pages
Date: 1994-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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