Technology shocks matter

Jonas Fisher

No WP-02-14, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: This paper uses the neoclassical growth model to identify the effects of technological change on the US business cycle. In the model there are two sources of technological change: neutral, which effects the production of all goods homogeneously, and investment-specific. Investment-specific shocks are the unique source of the secular trend in the real price of investment goods, while shocks to both kinds of technology are the only factors which affect labor productivity in the long run. Consistent with previous empirical work which considers only neutral shocks, the results suggest these shocks account for little, about 6 percent, of the business cycle variation in hours worked. In contrast, investment-specific shocks account for about 48 percent, a new finding which suggests that technology shocks are an important source of the business cycle.

Keywords: Technology; Business cycles (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-dge and nep-fin
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Citations: View citations in EconPapers (67)

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Working Paper: Technology Shocks Matter (2004)
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