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CONTRACTIONARY TECHNOLOGY SHOCKS

Published online by Cambridge University Press:  13 June 2017

Francesco Giuli  and
Massimiliano Tancioni
Francesco Giuli*
Affiliation:
Roma Tre University
Massimiliano Tancioni
Affiliation:
Sapienza University of Rome
*
Address correspondence to: Francesco Giuli, Department of Economics, Roma Tre University, Via Silvio D'Amico, 77, 00145 Rome, Italy; e-mail: francesco.giuli@uniroma3.it.
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Abstract

This paper adds to the large body of literature on the effects of technology shocks empirically and theoretically. Using a structural vector error correction model, we first provide evidence that not only hours but also investment decline temporarily following a technology improvement. This result is robust to important data and identification issues addressed in the literature. We then show that the negative response of inputs is consistent with an estimated monetary model in which the presence of strategic complementarity in price setting, in addition to nominal rigidities, lowers the sensitivity of prices to marginal costs, and monetary policy does not fully accommodate the shock.

Keywords

Technology ShocksInputs DynamicsStructural Vector Error Correction ModelNew Keynesian DSGE ModelBayesian Inference
Type
Articles
Information
Macroeconomic Dynamics , Volume 21 , Issue 7 , October 2017 , pp. 1752 - 1789
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

We thank an associate editor and two anonymous referees for very useful feedback. We also thank Elton Beqiraj, Giuseppe Ciccarone, Enrico Marchetti, and Mario Tirelli for useful comments and discussions. The usual disclaimer holds. Financial support from the Roma Tre University, the Sapienza University of Rome, and the Ministero dell'Istruzione, dell'Università e della Ricerca (MIUR) is gratefully acknowledged.

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