Working Paper: NBER ID: w8919
Authors: Julio J. Rotemberg
Abstract: This paper investigates whether it is possible to entertain simultaneously two attractive views about US GDP. The first is that long term growth in US GDP is attributable to an empirically plausible specification of random technical progress. The second is that deviations of GDP from a fitted smooth 'trend' are mostly attributable to shocks that have only temporary effects, so that they are unrelated to the shocks to technical progress that lead to long term growth. The paper shows that these two views are not incompatible by constructing a model where stochastic technical progress (whose properties are calibrated to fit some features of US data) has essentially no effect on suitably detrended time series of GDP. The paper also studies variations in wedges between price and marginal cost that are capable of giving rise to these transitory movements.
Keywords: No keywords provided
JEL Codes: E3; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| long-term technical progress (O33) | cyclical fluctuations in GDP (E32) |
| long-term growth (D25) | cyclical fluctuations in GDP (E32) |
| shocks to technical progress (O33) | cyclical fluctuations in GDP (E32) |
| long-term technical progress (O33) | detrended time series of GDP (E20) |
| cyclical series (E32) | detrended GDP series (P24) |