Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103204
Authors: 
Mayer, Eric
Rüth, Sebastian
Scharler, Johann
Year of Publication: 
2014
Series/Report no.: 
Würzburg Economic Papers 92
Abstract: 
Using a sign restrictions approach, we document that total factor productivity (TFP) moves counter-cyclically in the aftermath of supply and demand side shocks. To interpret our empirical results, we conduct counter-factual simulations, based on a New Keynesian DSGE model in which TFP fluctuates endogenously due to time-varying labor effort. The simulations show that the decline in the output gap, following an adverse shock, is dampened by the endogenously improving TFP as long as the nominal interest rate remains strictly positive during the downturn. If the economy hits the zero lower bound, the decline in the output gap is amplified when TFP improves endogenously.
Subjects: 
TFP
labor effort
zero lower bound
JEL: 
E24
E30
E32
E40
Document Type: 
Working Paper

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