Working Paper Series, FIEF - Trade Union Institute for Economic Research
Annika Alexius and Mikael Carlsson
Measures of Technology and the Business Cycle: Evidence from Sweden and the U.S.
Abstract: Empirical evidence on the cyclical behavior of technology
shocks, or the relative importance of technology shocks versus other
structural shocks as sources of fluctuations, hinges crucially on the
identification of technological changes. In this paper, we study different
measures of technology in order to find out (i) to what extent they capture
the same underlying phenomenon and (ii) whether the implications for
macroeconomic theory vary between approaches. Several variations of the
production function approach and structural VAR models are investigated:
the classic Solow residual, the refined Solow residuals of Burnside et al
(1995) and Basu and Kimball (1997), large cointegrated VAR models as in
King et al (1991) and a small VAR in first differences ŕ la Galí (1999). It
turns out that the different measures of technological change are
reasonably coherent when applied to US data. However, they are often
insignificantly related in the case of Sweden. Furthermore, our results do
not support the hypothesis that business cycle fluctuations are primarily
drive by changes in technology.
Keywords: Technology shocks; Production function approach; Structural VAR models; (follow links to similar papers)
JEL-Codes: C32; D24; E32; (follow links to similar papers)
47 pages, December 28, 2001
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