Productivity and U.S. Macroeconomic Performance: Interpreting the Past and Predicting the Future with a Two-Sector Real Business Cycle Model

38 Pages Posted: 18 Jul 2006

See all articles by Peter N. Ireland

Peter N. Ireland

Boston College - Department of Economics; National Bureau of Economic Research (NBER)

Scott D. Schuh

Federal Reserve Bank of Boston - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: April 2006

Abstract

A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investment-goods-producing technologies. This model attributes most of the productivity slowdown of the 1970s to the consumption-goods sector; it suggests that a slowdown in the investment-goods sector occurred later and was much less persistent. Against this broader backdrop, the model interprets the more recent episode of robust investment and investment-specific technological change during the 1990s largely as a catch-up in levels that is unlikely to persist or be repeated anytime soon.

JEL Classification: E32, O41, O47

Suggested Citation

Ireland, Peter N. and Schuh, Scott, Productivity and U.S. Macroeconomic Performance: Interpreting the Past and Predicting the Future with a Two-Sector Real Business Cycle Model (April 2006). FRB of Boston Working Paper No. 06-10. Available at SSRN: https://ssrn.com/abstract=917869 or http://dx.doi.org/10.2139/ssrn.917869

Peter N. Ireland

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
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617-552-3687 (Phone)
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National Bureau of Economic Research (NBER)

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Scott Schuh (Contact Author)

Federal Reserve Bank of Boston - Research Department ( email )

600 Atlantic Ave.
Boston, MA 02210
United States
617-973-3941 (Phone)
617-619-7541 (Fax)

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