TY  - JOUR
AU  - Basu,Susanto
TI  - Intermediate Goods and Business Cycles: Implications for Productivity   and Welfare
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4817
PY  - 1994
Y2  - August 1994
UR  - http://www.nber.org/papers/w4817
L1  - http://www.nber.org/papers/w4817.pdf
N1  - Author contact info:
Susanto Basu
Department of Economics
Boston College
140 Commonwealth Avenue
Chestnut Hill, MA 02467
Tel: 617/552-2182
Fax: 617/552-2308
E-Mail: susanto.basu@bc.edu
AB  - This paper presents an aggregate demand-driven model of business cycles that provides a new explanation for the procyclicality of productivity, and simultaneously predicts large welfare losses from monetary non-neutrality. The key features of the model are an input- output production structure, imperfect competition, countercyclical markups, and, for some results, state- dependent price rigidity.  True technical efficiency is procyclical even though production takes place with constant returns, without technology shocks or technological externalities.  The paper has observable implications that distinguish it empirically from related work.  These implications are generally supported by data from U.S. manufacturing industries.
ER  -