Macroeconomic Learning and the Propagation of Technology Shocks
31 Pages Posted: 10 Dec 2008
Date Written: December 9, 2008
Abstract
We incorporate learning in a standard dynamic stochastic general equilibrium model along two empirically-supported dimensions. First, we assume that agents cannot directly observe the individual components of the productivity shock and instead must conduct signal extraction exercises and update beliefs about the source of aggregate shocks. For this type of learning to have qualitative impacts on dynamic behavior we must assume either a counterfactually high relative variance or a large persistence parameter on the trend component of productivity. Second, we propose an alternative learning mechanism in which technological innovations diffuse slowly through the economy. This mechanism is successful at generating a variety of empirically observed responses under reasonable parameterizations.
Keywords: Productivity Shocks, Labor Responses, Learning, Technology, Business Cycles
JEL Classification: E32, E13, O33
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy
By Lawrence J. Christiano, Martin Eichenbaum, ...
-
Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy
By Lawrence J. Christiano, Martin Eichenbaum, ...
-
An Estimated Stochastic Dynamic General Equilibrium Model of the Euro Area
By Frank Smets and Rafael Wouters
-
An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area
By Frank Smets and Rafael Wouters
-
Optimal Monetary Policy with Staggered Wage and Price Contracts
By Christopher J. Erceg, Dale W. Henderson, ...
-
Shocks and Frictions in Us Business Cycles: A Bayesian DSGE Approach
By Frank Smets and Rafael Wouters
-
Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach
By Frank Smets and Rafael Wouters
-
Shocks and Frictions in U.S. Business Cycles: A Bayesian DSGE Approach
By Frank Smets and Rafael Wouters
-
Resuscitating Real Business Cycles
By Robert G. King and Sergio T. Rebelo
-
Has Monetary Policy Become More Effective?
By Jean Boivin and Marc P. Giannoni