Working Paper: NBER ID: w16681
Authors: Peter N. Ireland
Abstract: This paper estimates, using data from the United States and Euro Area, a two-country stochastic growth model in which both neutral and investment-specific technology shocks are nonstationary but cointegrated across economies. The results point to large and persistent swings in productivity, both favorable and adverse, originating in the US but not transmitted to the EA. More specifically, the results suggest that while the EA missed out on the period of rapid investment-specific technological change enjoyed in the US during the 1990s, it also escaped the stagnation in neutral technological progress that plagued the US in the 1970s.
Keywords: Stochastic growth; Technology shocks; Euro Area; United States
JEL Codes: E32; F41; F43; O41; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US technology shocks (N12) | Euro Area productivity trends (O49) |
| US investment-specific technological change (O39) | Euro Area productivity trends (O49) |
| US neutral technological progress (O33) | Euro Area productivity trends (O49) |
| Euro Area's economic structure (F36) | responsiveness to US technology shocks (F41) |
| US productivity trends (O49) | Euro Area productivity trends (O49) |