Anticipated technology shocks: FB3-5/2017-11E-PDF

a re-evaluation using cointegrated technologies /

"Two approaches have been taken in the literature to evaluate the relative importance of news shocks as a source of business cycle volatility. The first is an empirical approach that performs a structural vector autoregression to assess the relative importance of news shocks, while the second is a structural-model-based approach. The first approach suggests that anticipated technology shocks are an important source of business cycle volatility; the second finds anticipated technology shocks are incapable of generating any business cycle volatility. This paper challenges the latter conclusion by presenting a structural news shock model adapted to reproduce the cointegrating relationship between total factor productivity and the relative price of investment. With cointegrated neutral and investment-specific technology, anticipated shocks to the common stochastic trend explain approximately 22%, 32%, 34% and 20% of the variance of output, investment, hours and consumption in the United States, respectively, reconciling the discrepancy between theory and data"--Abstract, p. [ii].

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Department/Agency Bank of Canada.
Title Anticipated technology shocks
Subtitle a re-evaluation using cointegrated technologies /
Series Title Bank of Canada staff working paper,
Publication Type Series - View Master Record
Language [English]
Format Electronic
Electronic Document

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Note "April 2017."
Date 2017.
Number of Pages [ii], 33 p. :
Catalogue Number
  • FB3-5/2017-11E-PDF
Subject Terms Technological innovation, Economic analysis, Economic impact