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http://hdl.handle.net/10419/53859
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| Title: | | Technology shocks and business cycles: The role of processing stages and nominal rigidities  |
| Authors: | | Phaneuf, Louis Rebei, Nooman |
| Issue Date: | | 2007 |
| Series/Report no.: | | Bank of Canada Working Paper 2007,7 |
| Abstract: | | This paper develops and estimates a dynamic general equilibrium model that realistically accounts for an input-output linkage between firms operating at different stages of processing. Firms face technological change which is specific to their processing stage and charge new prices according to stage-specific Calvo-probabilities. Only a fixed fraction of households have an opportunity to adjust nominal wages to new information each period. Intermediate-stage technology shocks account for the bulk of output variability at business cycle frequencies, while final-stage technology shocks do not explain much. Although technology shocks drive the business cycle, the model predicts weakly procyclical real wages, and a near-zero correlation between return to working and hours worked. Furthermore, the model has rich implications for the dynamics of business cycles. |
| Subjects: | | Business fluctuations and cycles Economic models |
| JEL: | | E32 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Bank of Canada Working Papers
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