Money growth has to be unperceived to have real effects. Using data from the German hyperinflation, an equation that relates price change dispersion to exogenous unperceived money shocks is estimated. Zvi finds that unperceived money growth does affect price dispersion, as the model predicts, while perceived money has no effect. This paper derives from Zvi's thesis at the University of Rochester. In this work Zvi Hercowitz and Michael Sampson develop and estimate one of the first models of economic growth and cycles.
Shocks come about from both neutral and capital-embodied technological change.
Unlike standard real business cycle models, temporary shocks have permanent effects on output and wages in this framework. Casual empiricism suggests that technological progress is often embodied in the form of new and improved capital goods. The paper analyzes the role of this type of technological change in U.S. economic growth. The results suggest that investment-specific technological progress accounts for the major part of U.S. economic growth over the postwar period. Apart from his research work, Zvi Hercowitz enjoys drawing and painting.