Endogenous Technology Adoption and R&amp;D as Sources of Business Cycle Persistence

Anzoategui, Diego; Comín, Diego; Gertler, Mark; Martinez, Joseba

doi:10.3386/w22005

Cited by 121 publications

(192 citation statements)

References 6 publications

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“…Eggertsson and Mehrotra (2014) argue that a combination of low effective demand and the zero lower bound on nominal rates can generate a long-lived slump. In contrast, Gordon (2014), Anzoategui et al (2015) and others attribute stagnation to a decline in productivity. Hall (2015) surveys other theories as well.…”

Section: Dashed Line Is a Linear Trend That Fits Data Frommentioning

confidence: 99%

The Tail that Wags the Economy: Belief-Driven Business Cycles and Persistent Stagnation

2015

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The "Great Recession" was a deep downturn with long-lasting effects on credit markets, labor markets and output. We explore a simple explanation: This recession has been more persistent than others because it was perceived as an extremely unlikely event before2007. Observing such an episode led all agents to re-assess macro risk, in particular, the probability of tail events. Since changes in beliefs endure long after the event itself has passed and through its effects on prices and choices, it produces long-lasting effects on investment, employment and output. To model this idea, we study a production economy with agents who use standard econometric tools to estimate the distribution of aggregate shocks. When they observe a new shock, they re-estimate the distribution from which it was drawn. Even transitory shocks have persistent effects because, once observed, they stay forever in the agents' data set. We feed a time-series of US macro data into our model and show that our belief revision mechanism can explain the 12% downward shift in US trend output.JEL Classifications: D84, E32

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Section: Dashed Line Is a Linear Trend That Fits Data Frommentioning

confidence: 99%

The Tail that Wags the Economy: Belief-Driven Business Cycles and Persistent Stagnation

2015

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“…Our results are in line with Rendahl (2016), but they hint that the in ‡uence of demand on aggregate supply through productivity seems to increase output multipliers much more. The results of Reifschneider et al (2015) and Anzoategui et al (2016) lead us to believe that endogenous changes in productivity are the most important factor of hysteresis. Therefore, the results of Rendahl (2016) may underestimate the e¤ectiveness of …scal policy in the presence of hysteresis.…”

Section: Transmission Of Shocks With Hysteresismentioning

confidence: 99%

“…The …ndings of Anzoategui et al (2016) suggest that endogenous changes in TFP caused by a fall in demand is the most important factor of hysteresis. To model endogenous changes in TFP, we add a very simple learningby-doing mechanism into the production function, following the formulation of Tervala (2013), based on the idea of Chang et al (2002).…”

Section: Introductionmentioning

confidence: 99%

“…However, the latter accounts for only 13% of the cumulative post-Great Recession shortfall in potential output, while the rest is explained by the damage of the Great Recession to productivity. Anzoategui et al (2016) study the view that the productivity slowdown after the Great Recession was an endogenous response to a reduction in demand. They develop a New Keynesian DSGE model with endogenous TFP that allows for the costly development and adoption of new technologies.…”

Section: Introductionmentioning

confidence: 99%

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Hysteresis and fiscal policy

Engler

Tervala

2018

Journal of Economic Dynamics and Control

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Empirical studies support the hysteresis hypothesis that recessions have a permanent e¤ect on the level of output. We analyze the implications of hysteresis for …scal policy in a DSGE model. We assume a simple learning-by-doing mechanism where demand-driven changes in employment can a¤ect the level of productivity permanently, leading to hysteresis in output. We show that the …scal output multiplier is much larger in the presence of hysteresis and that the welfare multiplier of …scal policy-the consumption equivalent change in welfare for one dollar change in public spending-is positive (negative) in the presence (absence) of hysteresis. The main bene…t of accommodative …scal policy in the presence of hysteresis is to diminish the damage of a recession to the long-term level of productivity and, thus, output. Terms of use: Documents in

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“…Each of these schools of thought captures an important element of the growth process. The semi-endogenous approach, while inheriting from Romer (1990) the idea that the aggregate ‡ow of innovations increases in the size of the R&D employment, stresses the increase in the di¢ culty of generating a constant TFP growth 1 . The scale free fully endogenous school of thought stresses that the number of innovations per sector increases with the fraction of the labour force which each sector employs in R&D, without assuming an increasing di¢ culty of R&D 2 .…”

Section: Introductionmentioning

confidence: 99%

Combining semi-endogenous and fully endogenous growth: A generalization

Cozzi

2017

Economics Letters

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This paper shows that combining the semi-endogenous and the fully endogenous growth mechanisms with a general CES aggregator, either growth process can prevail in the balanced growth path depending on their degree of complementarity/substitutability. Policy-induced long-run economic switches to the fully endogenous steady state as the R&D employment ratio surpasses a positive threshold are possible if the two growth engines are gross substitutes.JEL classi…cation: O30, O40.

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Endogenous Technology Adoption and R&D as Sources of Business Cycle Persistence

Cited by 121 publications

References 6 publications

The Tail that Wags the Economy: Belief-Driven Business Cycles and Persistent Stagnation

The Tail that Wags the Economy: Belief-Driven Business Cycles and Persistent Stagnation

Hysteresis and fiscal policy

Combining semi-endogenous and fully endogenous growth: A generalization

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