Ana Maria Santacreu
Federal Reserve Bank of Saint Louis
Institutional Affiliation: Federal Reserve Bank of Saint Louis
Information about this author at RePEc
NBER Working Papers and Publications
|June 2009||Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations|
with Diego A. Comin, Mark Gertler: w15029
We develop a model in which innovations in an economy's growth potential are an important driving force of the business cycle. The framework shares the emphasis of the recent "new shock" literature on revisions of beliefs about the future as a source of fluctuations, but differs by tieing these beliefs to fundamentals of the evolution of the technology frontier. An important feature of the model is that the process of moving to the frontier involves costly technology adoption. In this way, news of improved growth potential has a positive effect on current hours. As we show, the model also has reasonable implications for stock prices. We estimate our model for data post-1984 and show that the innovations shock accounts for nearly a third of the variation in output at business cycle frequenc...