by force of demand explaining international comovements abstract this paper explores the possibility that economic fluctuations may be largely demand driven it is shown that the stylized open economy business cycle regularities documented by feldstein and horioka 1980 the economic journal 90 june 314 329 and backus et al 1992 journal of political economy 100 4 745 775 can be explained by demand shocks alone even in a standard general equilibrium model frictions such as market incompleteness increasing returns to scale and sticky prices do not appear to be the preconditions for resolving these long standing puzzles

financial integration and business cycles in a small open economy abstract the purpose of this study is to examine a dynamic stochastic general equilibrium framework with financial and informational frictions and foreign borrowing in the case of money growth and technology shocks for a small open economy and to analyze the implications of varying degrees of financial integration for aggregate fluctuations and propagation mechanisms in the economy the existence of informational asymmetries among the agents in the model necessitates financial intermediation in the economy moreover there is uncertainty involved in the production process which leads to collateralized borrowing by firms and therefore has to be taken into account in the design of the loan contracts between firms and financial intermediaries it is shown that increasing financial integration amplifies the effect of a positive temporary monetary shock on output consumption investment labor demand and loans whereas it has barely any implication for the impact of a positive temporary technology shock on the economy

how much is too much an investigation of the effect of the number of choice sets context dependence and the choice of bid vectors in choice experiments in a split sample design we examine how the number of choice sets design of the first choice set context dependence and the choice of attribute levels in the cost attribute affect the precision in the elicited preferences in otherwise completely identical choice experiment surveys these issues are investigated for swedish households marginal willingness to pay to reduce power outages our results indicate that neither the number of choice sets nor the design of the first choice set has a significant impact on estimated marginal willingness to pay while the effect was significant for the additive scaling of the cost vector at the end of the article we discuss the implications of our results on future developments and applications of choice experiments

the effects of permanent technology shocks on hours can the rbc model fit the var evidence abstract i show that a standard rbc model can be used to explain why hours per capita decrease in response to a permanent technology shock when hours enter a vector autoregressive var in first differences and why hours increase when hours enter in levels there are two parts to my argument first empirical evidence suggests that a positive permanent technology shock goes together with a persistent increase in the expected growth rate and the rbc model predicts this increase in the expected growth rate to have a downward effect on hours worked and can even result in a sizeable negative response of hours second first differencing hours in vars results in a considerable downward bias using the estimated parameters for the technology process i find i that the true model response of hours is positive and ii that when the var methodology is used with finite samples of simulated data then the hours response is negative positive when hours enter the var in first differences levels

is the decline in labour s share in the us driven by changes in technology and or market power an empirical analysis in this paper we provide a perspective on the explanations suggested for the decline in labour s share in the nonfinancial corporations sector of us economy since 1947 the literature identifies t

monopolistic competition growth and public good provision a normal good in this article i develop a model of public good provision in which private goods are supplied in a monopolistically competitive market in this context increases in the size of the group are increases in the population of a society i find that increases in population lead to reduced public good provision the reason is quite simple as population increases the number of private goods available for consumption also increases this raises the marginal utility of income and increases the opportunity cost of contributing to the public good while the level of voluntary contributions falls in this model the optimal level of provision is shown to increase with population thus there is a growing divergence between the optimal and equilibrium levels of provision of the public good in the standard model with a pure public good individual welfare rises with an increase in population both because of the increase in the level of provision of the public good and the reduced contribution per person that results from the population increase furthermore in the model of monopolistic competition without a public good welfare also increases with population due to the wider of variety of goods which are available in a larger economy however when the models are combined an increase in popu lation has an ambiguous effect on welfare this stems from the reduction in the level of provision of the public good as the population increases the model of monopolistic competition in this article is based on krugman 1980 this model assumes a simple form of increasing returns to scale under which each good may be produced by incurring a fixed set up cost plus a constant marginal cost of production when the population increases the economy can support a broader range of goods and this leads to a higher real income for individuals in the economy thus economic growth arising from a scale effect leads to reduced contributions to the public good in this model economic growth can also be caused by increases in total factor productivity in the model of monopolistic competition used here this would be reflected by reductions the fixed and marginal cost of production it turns out that reductions in these parameters also lead to reduced public good provision

technology shocks structural breaks and the effects on the business cycle abstract it is shown that time series of us productivity and hours are apparently affected by a structural break in the late 60s moreover the importance of technology shocks over the business cycle has sharply decreased after the break

on the heterogeneity of sectoral growth and structural dynamics evidence from austrian manufacturing industries this article studies the factors driving structural dynamics across austrian manufacturing industries using a structural vector autoregressive model svar framework we identify sectoral labour productivity and demand shocks that are orthogonal to aggregate shocks we analyse the sectoral impulse response patterns and find that the effect of industry labour productivity shocks on industry output growth is quite heterogeneous we devise a taxonomy that allows us to classify industries according to the effect productivity and demand shocks have on output growth we also show that productivity shocks are quite heterogeneous not just across industries but also over time whereas shocks to sectoral demand growth are more systematic we test the taxonomy in a panel regression and are able to confirm our sector specific findings industry demand shocks and aggregate productivity and demand shocks lead always to an increase in industry output and industry employment

sticky prices fair wages and the co movements of unemployment and labor productivity growth abstract this paper studies the co movements of unemployment and labor productivity growth for the u s economy measures of co movements in the frequency domain indicate that co movements between variables differ strongly according to the frequency first long term and business cycle co movements are larger than short term co movements second co movements are negative in the short and long run but positive over the business cycle a new keynesian model that combines nominal rigidity on the goods market sticky prices and real rigidity on the labor market fair wages is shown to be quantitatively consistent with the observed co movements both in the long term and over the business cycle however the model fails to explain the short term co movements

do environmental benefits matter evidence from a choice experiment among house owners in germany residential buildings strongly contribute to global co2 emissions due to the high energy demand for electricity and heating particularly in industrialised countries within the eu decentralised heat generation is of particular relevance for future climate policy as its emissions are not covered by the eu ets we conducted a choice experiment concerning energy retrofits for existing houses in germany in the experiment the approximately 400 sampled house owners could either choose a modern heating system or an improved thermal insulation for their home we used standard and mixed logit specifications to analyse the choice data we found environmental benefits to have a significant impact on choices of heating systems however they played no role in terms of insulation choices based on the estimated mixed logit model we further obtained willingness to pay wtp measures for co2 savings

technology shocks and monetary policy assessing the fed s performance abstract the purpose of the present paper is twofold first we characterize the fed s systematic response to technology shocks and its implications for u s output hours and inflation second we evaluate the extent to which those responses can be accounted for by a simple monetary policy rule including the optimal one in the context of a standard business cycle model with sticky prices our main results can be described as follows first we detect significant differences across periods in the response of the economy as well as the fed s to a technology shock second the fed s response to a technology shock in the volcker greenspan period is consistent with an optimal monetary policy rule third in the pre volcker period the fed s policy tended to overstabilize output at the cost of generating excessive inflation volatility our evidence reinforces recent results in the literature suggesting an improvement in the fed s performance

can long run restrictions identify technology shocks gali s innovative approach of imposing long run restrictions on a vector autoregression var to identify the effects of a technology shock has become widely utilized in this paper we investigate its reliability through monte carlo simulations using calibrated business cycle models overall gali s methodology appears to be fruitful the impulse responses derived from the artificial data generally have the same sign and qualitative pattern as the true responses and the approach can be informative in discriminating between alternative models however our results reveal some important quantitative shortcomings including considerable estimation uncertainty about the impact of technology shocks on macroeconomic variables more generally the conditions under which the methodology performs well appear considerably more restrictive than implied by the key identifying assumption this underscores the importance of using economic models to guide in the implementation of the approach in interpreting the results and in assessing its limitations jel c32 e32 o33

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

the macroeconomic effects of distortionary taxation abstract prescott 1986 estimates that technology shocks account for 75 of the fluctuations in the postwar u s economy this paper reestimates the contribution of technological change for a standard business cycle model that includes a public sector and fiscal disturbances i find that a significant fraction of the variance of aggregate consumption investment output capital stock and hours of work can be explained by disturbances in labor and capital tax rates and government consumption i also use the model to quantify the welfare costs of capital and labor taxation for both the time series and welfare calculations maximum likelihood estimates of taste technology and policy parameters are used

real rigidities productivity improvements and investment dynamics abstract the theoretical literature on business cycles predicts a positive investment response to productivity improvements a prediction we question from theoretical and empirical perspectives we show that a short term negative response of investment to a positive technology shock is consistent with a reasonably parameterized new keynesian dynamic stochastic general equilibrium dsge model in which firm specific capital introduces an additional real rigidity and monetary policy is not fully accommodative employing bayesian techniques we provide evidence that permanent productivity improvements have short term contractionary effects on investment although this result can be obtained from both firm specific and rental capital models only in the case of the former is the average price duration in line with the microeconometric evidence

productivity and employment in a developing country some evidence from korea summary the vast majority of the sizable empirical literature which examines the relationship between productivity and employment examines data from developed countries in this paper we contribute to the limited empirical literature on the productivity employment relationship in developing countries by applying structural vector autoregression var models on korean data we find that productivity enhancing technology shocks reduce hours worked in the short run such evidence is qualitatively similar to findings from developed countries and more consistent with sticky price models than the real business cycle theory although productivity enhancing technology shocks are an important source of economic growth in korea they may have exerted a negative impact on employment

automatic stabilizers fiscal rules and macroeconomic stability abstract this paper analyzes the effect of the fiscal structure upon the trade off between inflation and output stabilization induced by technological shocks in a dge model with nominal and real rigidities that also integrates a rich menu of fiscal variables as well as a target on the debt to output ratio the channels through which fiscal policy affects macroeconomic stability include supply side effects of distortionary taxes the procyclical behavior of public spending induced by fiscal rules and the conventional effect of automatic stabilizers operating through disposable permanent income the paper investigates these channels and concludes that contrary to what has been found in rbc models distortionary taxes tend to reduce output volatility relative to lump sum taxes when significant rigidities are present we also study the stabilization effect of alternative distortionary tax structures and find that these are only relevant if substantial rigidities are present

willingness to pay for carbon offset certification and co benefits among high flying young adults in the uk voluntary carbon offsets represent a growing share of the carbon market as a whole and have the potential to contribute to meeting greenhouse gas emissions targets and reducing anthropogenic climate change certain offset project types may also deliver co benefits including safeguarding or promoting biodiversity supporting human development and poverty reduction and enabling market and technology development in low carbon sectors these co benefits might encourage consumers to participate in the voluntary offset market depending on their effects both on consumers willingness to pay wtp for offsets and on implementation costs however the offset market is not yet sufficiently developed to give a clear indication of consumer wtp for offsets with varying attributes this exploratory stated preference study therefore uses a choice experiment to estimate wtp for certified and uncertified offsets with or without these specific co benefits in an aviation context it is to the best of our knowledge the first to do so our results suggest that uptake of voluntary offsets may be encouraged by investing in projects with co benefits and by emphasising those co benefits to consumers they also suggest that certification regimes will add value to offsets helping compensate for increased costs provided that consumers are made fully aware of them

the response of hours to a technology shock a two step structural var approach the response of hours to a technology shock is a controversial issue in macroeconomics part of the difficulty lies in that the estimated response is sensitive to the specification of hours in structural vector autoregressions svars this paper uses a simple two step approach to consistently estimate the response of hours the first step considers a svar model with a relevant stationary variable but excluding hours given a consistent estimate of technology shocks in the first step the response of hours to this shock is estimated in a second step simulation experiments from an estimated dynamic stochastic general equilibrium dsge model show that this approach outperforms standard svars when applied to u s data the two step approach predicts a short run decrease followed by a hump shaped positive response this result is robust to other specifications and data

the transmission of monetary policy and technology shocks in the euro area this article analyses the response of a set of euro area macroeconomic variables to monetary policy and technology shocks based on structural vector auto regressions vars the data set runs from 1970 1 until 2006 4 and includes a novel long run series for hours worked per capita in the euro area we find that real macroeconomic variables follow a hump shaped response after monetary policy shocks and jump on impact after technology shocks we also provide evidence that hours worked fall after a positive technology shock these conclusions are robust to different sample periods and specifications of the variables

technology shocks and robust sign restrictions in a euro area svar we use a model based identification strategy to estimate the impact of technology shocks on hours worked and employment in the euro area the sign restrictions applied in the vector autoregression var analysis are consistent with a large class of dynamic stochastic general equilibrium dsge models and are robust to parameter uncertainty the results are in line with the conventional real business cycle rbc interpretation that hours worked rise as a result of a positive technology shock by comparing the sign restrictions method to the long run restriction approach of gali quaterly journal of economics 1992 709 38 we show that the results do not depend on the stochastic specification of the hours worked series or the data sample but only on the identification scheme

do technology shocks lead to a fall in total hours worked this paper contributes to the debate initiated by gali in 1999 i provide a theory with capital income taxation labor hoarding as well as long run shifts in the social attitudes to the workplace modelled as leisure at the workplace to argue that there are other shocks that may influence labor productivity in the long run i introduce medium run identification and show it to be superior to long run identification or standard short run identification when applied to artificial data with u s data and medium run identification i find the robust result that technology shocks lead to a hump shaped response of total hours worked which is mildly positive following a near zero initial response jel e32 e24 c32 c15 copyright c 2004 the european economic association

on the role of technology shocks as a source of business cycles some new evidence i provide some new evidence that reinforces the conclusion in gal o 1999 that exogenous variations in technology play a very limited role if any as sources of the business cycle first i provide evidence that supports the identie cation of technology shocks proposed in that paper second i show that similar e ndings obtain when the same approach is implemented for the euro area using a newly available data set jel e32 e24

valuing climate protection through willingness to pay for biomass ethanol abstract this study uses a multi part split sample contingent valuation method cvm and fair share fs survey to better understand the public s valuation of mitigating global climate change through its willingness to pay for biomass or cellulosic ethanol in addition to a basic cvm question a related scenario was developed that asked half of the survey respondents to state their fair share cost to lessen a potential food shortage in the next decade also through the expanded use of cellulosic ethanol three alternative biomass feedstocks were assessed farming residues forestry residues and paper mill wastes and municipal solid wastes overall a slightly larger proportion of respondents were wtp extra for cellulosic ethanol in the basic cvm scenario than in the fs scenario though no significant differences were found in the wtp for the different feedstocks bid curve lognormal regression results for the two models were similar supporting the idea that asking a fs rather than a conventional wtp question may be justifiable in some circumstances such as in cases of a national emergency

technology shocks and the labor input response evidence from firm level data we study the relationship between technology shocks and labor input on swedish firm level data using a production function approach to identify technology shocks taking standard steps yields a contractionary contemporaneous labor input response in tine with previous studies this finding may however be driven by measurement errors in the labor input variable relying on a unique feature of our data set which contains two independently measured firm specific labor input measures we can evaluate the potential bias we do not find that this bias conceals any true positive contemporaneous effect the results thus point away from standard flexible price models and toward models emphasizing firm level rigidities