What Happens After a Technology Shock?

54 Pages Posted: 18 Aug 2003  

Lawrence J. Christiano

Northwestern University; Federal Reserve Bank of Cleveland; Federal Reserve Bank of Chicago; Federal Reserve Bank of Minneapolis; National Bureau of Economic Research (NBER)

Martin Eichenbaum

Northwestern University; National Bureau of Economic Research (NBER)

Robert Vigfusson

Federal Reserve Board - Trade and Quantitative Studies

Multiple version iconThere are 2 versions of this paper

Date Written: June 2003

Abstract

We provide empirical evidence that a positive shock to technology drives up per capita hours worked, consumption, investment, average productivity and output. This evidence contrasts sharply with the results reported in a large and growing literature that argues, on the basis of aggregate data, that per capita hours worked fall after a positive technology shock. We argue that the difference in results primarily reflects specification error in the way that the literature models the low-frequency component of hours worked.

Keywords: productivity, long-run restriction, hours worked, weak instruments

JEL Classification: E32, E24

Suggested Citation

Christiano, Lawrence J. and Eichenbaum, Martin and Vigfusson, Robert, What Happens After a Technology Shock? (June 2003). FRB International Finance Discussion Paper No. 768. Available at SSRN: https://ssrn.com/abstract=425004 or http://dx.doi.org/10.2139/ssrn.425004

Lawrence J. Christiano

Northwestern University ( email )

2003 Sheridan Road
Evanston, IL 60208
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847-491-8231 (Phone)
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Federal Reserve Bank of Cleveland

East 6th & Superior
Cleveland, OH 44101-1387
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Federal Reserve Bank of Chicago

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Federal Reserve Bank of Minneapolis

90 Hennepin Avenue
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National Bureau of Economic Research (NBER)

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Martin Eichenbaum

Northwestern University ( email )

2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8232 (Phone)
847-491-7001 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert John Vigfusson (Contact Author)

Federal Reserve Board - Trade and Quantitative Studies ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

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