This paper aims at quantifying the contribution of technical change to cyclical fluctuations in the US and Euro Area. We distinguish technical progress in labor-augmenting and capital-augmenting change. To this end, we derive and estimate a New Keynesian DSGE model embodying a constant elasticity of substitution (CES) production function for both areas. Our main findings are: i) capital-augmenting progress is the main source of technical change volatility; ii) labor-augmenting shocks give a negligible contribution to the variance of output; iii) technical change (of both types) explains more economic fluctuations in the US than in the euro area; iv) historical decomposition of GDP growth over our sample period (1980-2008) shows that capital-augmenting progress is one of the key drivers of the business cycle.

Economic fluctuations in the US and Euro area. Quantifying the contribution of technical change / Saltari, Enrico; Di Pietro, Marco. - In: SOUTHERN ECONOMIC JOURNAL. - ISSN 0038-4038. - STAMPA. - (2018), pp. 203-216.

Economic fluctuations in the US and Euro area. Quantifying the contribution of technical change

Saltari, Enrico;Di Pietro, Marco
2018

Abstract

This paper aims at quantifying the contribution of technical change to cyclical fluctuations in the US and Euro Area. We distinguish technical progress in labor-augmenting and capital-augmenting change. To this end, we derive and estimate a New Keynesian DSGE model embodying a constant elasticity of substitution (CES) production function for both areas. Our main findings are: i) capital-augmenting progress is the main source of technical change volatility; ii) labor-augmenting shocks give a negligible contribution to the variance of output; iii) technical change (of both types) explains more economic fluctuations in the US than in the euro area; iv) historical decomposition of GDP growth over our sample period (1980-2008) shows that capital-augmenting progress is one of the key drivers of the business cycle.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11573/1154736
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