Implementation Cycles in the New Economy

Scaramozzino, Pasquale; Temple, Jonathan R.W.; Vulkan, Nir

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Implementation Cycles in the New Economy

CEPR Discussion Paper No. 5032

32 Pages Posted: 12 Sep 2005

See all articles by Pasquale Scaramozzino

Pasquale Scaramozzino

University of Rome II - Faculty of Economics; University of London - School of Oriental and African Studies (SOAS); University of London - Centre for Financial and Management Studies (CeFIMS)

Jonathan R.W. Temple

Centre for Economic Policy Research (CEPR)

Nir Vulkan

University of Oxford - Said Business School

Date Written: May 2005

Abstract

The economic boom of the USA in the 1990s was remarkable in its duration, the sustained rise in equipment investment, the reduced volatility of productivity growth, and continued uncertainty about the trend growth rate. In this paper, we link these phenomena using an extension of the classic model of implementation cycles due to Shleifer (1986). The key idea is that uncertainty about the trend growth rate can lead firms to bring forward the implementation of innovations, temporarily eliminating expectations-driven business cycles, because delay is risky when beliefs are not common knowledge.

Keywords: Implementation cycles, New Economy, multiple equilibria

JEL Classification: E32

Suggested Citation: Suggested Citation

Scaramozzino, Pasquale and Temple, Jonathan R.W. and Vulkan, Nir, Implementation Cycles in the New Economy (May 2005). CEPR Discussion Paper No. 5032, Available at SSRN: https://ssrn.com/abstract=774125