Technology shocks, capital utilization and sticky prices

Chetan Dave, Scott J. Dressler

Research output: Contribution to journalArticle

Abstract

We quantitatively evaluate a business-cycle environment featuring endogenous capital utilization and nominal price rigidity that illustrates a negative relationship between labor hours and technology (TFP) shocks and a positive relationship between hours and investment (MEI) shocks. Sticky prices induce firms to suppress changes in output due to TFP shocks through changes in the utilization rate of the existing capital stock and labor demand. MEI shocks have an indirect impact on output via their link with capital utilization, and are shown to be the dominant driver of post-1979 US business cycles.

Original languageEnglish (US)
Pages (from-to)2179-2191
Number of pages13
JournalJournal of Economic Dynamics and Control
Volume34
Issue number10
DOIs
StatePublished - Oct 1 2010

Fingerprint

Shock
Personnel
Business Cycles
Rigidity
Industry
Output
Categorical or nominal
Driver
Technology shocks
Sticky prices
Capital utilization
Evaluate
Relationships
Business cycles

Keywords

  • Business-cycle shocks
  • Marginal efficiency of investment
  • Nominal rigidities
  • Total factor productivity

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics

Cite this

Technology shocks, capital utilization and sticky prices. / Dave, Chetan; Dressler, Scott J.

In: Journal of Economic Dynamics and Control, Vol. 34, No. 10, 01.10.2010, p. 2179-2191.

Research output: Contribution to journalArticle

Dave, Chetan ; Dressler, Scott J. / Technology shocks, capital utilization and sticky prices. In: Journal of Economic Dynamics and Control. 2010 ; Vol. 34, No. 10. pp. 2179-2191.
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