DP6720 The Effects of Technology Shocks on Hours and Output: A Robustness Analysis

Author(s): Fabio Canova, J David López-Salido, Claudio Michelacci
Publication Date: February 2008
Keyword(s): Long cycles, News shocks, Structural VARs, Technology disturbances
JEL(s): E00, J60, O33
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6720

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.