NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Business Cycles With A Common Trend in Neutral and Investment-Specific Productivity

Stephanie Schmitt-Grohé, Martín Uribe

NBER Working Paper No. 16071
Issued in June 2010
NBER Program(s):   EFG

This paper identifies a new source of business-cycle fluctuations. Namely, a common stochastic trend in neutral and investment-specific productivity. We document that in U.S. postwar quarterly data total factor productivity (TFP) and the relative price of investment are cointegrated. We show theoretically that TFP and the relative price of investment are cointegrated if and only if neutral and investment-specific productivity share a common stochastic trend. We econometrically estimate an RBC model augmented with a number of real rigidities and driven by a multitude of shocks. We find that in the context of our estimated model, innovations in the common stochastic trend explain a sizable fraction of the unconditional variances of output, consumption, investment, and hours.

download in pdf format
   (170 K)

email paper

This paper is available as PDF (170 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16071

Published: Stephanie Schmitt-Grohe & Martin Uribe. "Business Cycles With A Common Trend in Neutral and Investment-Specific Productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics. Volume 14, Issue 1. (January 2011) citation courtesy of

Users who downloaded this paper also downloaded these:
Schmitt-Grohe and Uribe w14215 What's News in Business Cycles
Beaudry and Lucke w14950 Letting Different Views about Business Cycles Compete
Curdia and Reis w15774 Correlated Disturbances and U.S. Business Cycles
Crucini and Shintani w16075 Measuring Business Cycles by Saving for a Rainy Day
Christiano, Trabandt, and Walentin w16074 DSGE Models for Monetary Policy Analysis
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us