Understanding the Puzzling Effects of Technology Shocks
FRB of St. Louis Working Paper No. 2007-018A
26 Pages Posted: 18 Apr 2007
Date Written: April 2007
Abstract
Under aggregate technology shocks, both aggregate inputs and sectorial inputs decline initially and then rise permanently. However, under sector-specific technology shocks, sectorial inputs decline permanently. In addition, sectorial output is very responsive to aggregate technology shocks but not so to sector-specific technology shocks. We show that a flexible-price RBC model with firm entry and exit is consistent with these stylized facts.
Keywords: Technology Shocks, Entry and Exit, Labor Market, Sticky Prices, Demand Rigidity, Business Cycle
JEL Classification: E31, E32, E52
Suggested Citation: Suggested Citation
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