Productivity and U.S. Macroeconomic Performance: Interpreting the Past and Predicting the Future with a Two-Sector Real Business Cycle Model

41 Pages Posted: 24 Oct 2007 Last revised: 24 Jun 2010

See all articles by Peter N. Ireland

Peter N. Ireland

Boston College - Department of Economics; National Bureau of Economic Research (NBER)

Scott D. Schuh

Federal Reserve Bank of Boston - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007

Abstract

A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investment-goods-producing technologies. This model attributes most of the productivity slowdown of the 1970s to the consumption-goods sector; it suggests that a slowdown in the investment-goods sector occurred later and was much less persistent. Against this broader backdrop, the model interprets the more recent episode of robust investment and investment-specific technological change during the 1990s largely as a catch-up in levels that is unlikely to persist or be repeated anytime soon.

Suggested Citation

Ireland, Peter N. and Schuh, Scott, Productivity and U.S. Macroeconomic Performance: Interpreting the Past and Predicting the Future with a Two-Sector Real Business Cycle Model (October 2007). NBER Working Paper No. w13532. Available at SSRN: https://ssrn.com/abstract=1024136

Peter N. Ireland (Contact Author)

Boston College - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Scott Schuh

Federal Reserve Bank of Boston - Research Department ( email )

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