Macroeconomic Learning and the Propagation of Technology Shocks

31 Pages Posted: 10 Dec 2008

See all articles by Hamilton B. Fout

Hamilton B. Fout

Kansas State University; Federal National Mortgage Association (Fannie Mae)

Neville Francis

University of North Carolina (UNC) at Chapel Hill - Department of Economics

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

Fout, Hamilton B. and Fout, Hamilton B. and Francis, Neville, Macroeconomic Learning and the Propagation of Technology Shocks (December 9, 2008). Available at SSRN: https://ssrn.com/abstract=1103694 or http://dx.doi.org/10.2139/ssrn.1103694

Hamilton B. Fout (Contact Author)

Kansas State University ( email )

Manhattan, KS 66502-4001
United States

Federal National Mortgage Association (Fannie Mae) ( email )

3900 Wisconsin Avenue, NW
Washington, DC 20016-2892
United States

Neville Francis

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
95
Abstract Views
819
rank
370,739
PlumX Metrics