Revisions in Utilization-Adjusted TFP and Robust Identification of News Shocks

55 Pages Posted: 13 Feb 2017

See all articles by André Kurmann

André Kurmann

Drexel University - LeBow College of Business

Eric R. Sims

University of Michigan at Ann Arbor; University of Notre Dame - Department of Economics

Date Written: February 2017

Abstract

This paper documents large revisions in a widely-used series of utilization-adjusted total factor productivity (TFP) by Fernald (2014) and shows that these revisions can materially affect empirical conclusions about the macroeconomic effects of news shocks. We propose an alternative identification that is robust to measurement issues with TFP, including the revisions in Fernald’s series. When applied to U.S. data, the shock predicts sustained future productivity growth while simultaneously generating strong impact responses of novel indicators of technological innovation and forward-looking information variables. The shock does, however, not lead to comovement in macroeconomic aggregates as typically associated with business cycle fluctuations.

Suggested Citation

Kurmann, André and Sims, Eric R., Revisions in Utilization-Adjusted TFP and Robust Identification of News Shocks (February 2017). NBER Working Paper No. w23142, Available at SSRN: https://ssrn.com/abstract=2915969

André Kurmann (Contact Author)

Drexel University - LeBow College of Business ( email )

School of Economics
3220 Market Street
Philadelphia, PA 19104
United States

Eric R. Sims

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

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