Productivity growth and the structure of the business cycle

Gilles Saint-Paul

Research output: Contribution to journalArticle

Abstract

Over the recent years 'opportunity cost' (OC) models of growth have argued that recessions are times when firms engage in productivity-improving activities because of intertemporal substitu- tion. This paper tests whether this approach is correct. The technique used to disentangle the trend from the cycle is semi-structural vector autoregression. The results are mildly supportive of the OC theory. There tends to be a negative impact of demand shocks on productivity, both in the short-run and in the long-run. And the short-run impact is stronger in those countries where fluctuations are more transitory. However, there is no significant response of R & D to demand shocks.

Original languageEnglish (US)
Pages (from-to)861-883
Number of pages23
JournalEuropean Economic Review
Volume37
Issue number4
DOIs
StatePublished - May 1993

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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