Working Paper: CEPR ID: DP6720
Authors: Fabio Canova; J David López-Salido; Claudio Michelacci
Abstract: We analyze the effects of neutral and investment-specific technology shocks on hours and output. Long cycles in hours are captured in a variety of ways. Hours robustly fall in response to neutral shocks and robustly increase in response to investment specific shocks. The percentage of the variance of hours (output) explained by neutral shocks is small (large); the opposite is true for investment specific shocks. `News shocks' that generically change expectations about future productivity, are uncorrelated with the estimated technology shocks.
Keywords: long cycles; news shocks; structural VARs; technology disturbances
JEL Codes: E00; J60; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| neutral technology shocks (E39) | per capita hours (J22) |
| investment-specific technology shocks (O39) | per capita hours (J22) |
| neutral technology shocks (E39) | output fluctuations (E39) |
| investment-specific technology shocks (O39) | output fluctuations (E39) |