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Contractionary Technology Shocks

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  • Giuli, Francesco
  • Tancioni, Massimiliano

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.

Suggested Citation

  • Giuli, Francesco & Tancioni, Massimiliano, 2017. "Contractionary Technology Shocks," Macroeconomic Dynamics, Cambridge University Press, vol. 21(7), pages 1752-1789, October.
    • Handle: RePEc:cup:macdyn:v:21:y:2017:i:07:p:1752-1789_00
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    Cited by:

    1. Stephen McKnight & Laura Povoledo, 2022. "Endogenous fluctuations and international business cycles," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(1), pages 312-348, February.

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