Technology and Non-Technology Shocks in a Two-Sector Economy

Aarhus University Economics Paper No. 2005-11

40 Pages Posted: 18 Jun 2008

See all articles by Francesco Busato

Francesco Busato

Aarhus University - School of Business and Social Sciences

Alessandro Girardi

National Institute of Statistics (ISTAT)

Amedeo Argentiero

University of Rome Tor Vergata, Department of Economics; Institute for Studies and Economic Analyses (ISAE)

Date Written: November 10, 2005

Abstract

This paper presents an empirically testable two-sector dynamic general equilibrium model for the United States economy that admits technology and non-technology shocks. Long-run identification restrictions further distinguish the impact of each shocks over the originating sector (i.e. as a sector-specific), and over other sectors different from the originating one (i.e. as a cross-sector shock), also exploring the shocks transmission mechanism across sectors. There are three main results. First, business cycle are mainly generated, in each sector, by technology shocks (mainly described by sector-specific shocks), but they are transmitted across sectors along the sectors' demand side, i.e. passing through non-technology shocks. Second, technology and non-technology shocks almost equally share the responsibility of fluctuations in the aggregate manufacturing sector. Third, the dynamic behavior of the durable good sector may be well represented by a standard Real Business Model; the non-durable good sector, on the other hand, would not be consistent with that predictions. Overall, due to a size effect, the aggregate dynamics is driven by the relatively larger sector, which is the non-durable good one.

Keywords: Long-run restrictions, sector-specific shocks, cross sector shocks, real business cycle, United States economy

JEL Classification: E2, E3, E32

Suggested Citation

Busato, Francesco and Girardi, Alessandro and Argentiero, Amedeo, Technology and Non-Technology Shocks in a Two-Sector Economy (November 10, 2005). Aarhus University Economics Paper No. 2005-11, Available at SSRN: https://ssrn.com/abstract=1147607 or http://dx.doi.org/10.2139/ssrn.1147607

Francesco Busato (Contact Author)

Aarhus University - School of Business and Social Sciences ( email )

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HOME PAGE: http://www.econ.au.dk/afn

Alessandro Girardi

National Institute of Statistics (ISTAT) ( email )

Via Cesare Balbo 16
00184 Rome, 0185
Italy

Amedeo Argentiero

University of Rome Tor Vergata, Department of Economics ( email )

Rome, I-00133
Italy

HOME PAGE: http://www.amedeoargentiero.com

Institute for Studies and Economic Analyses (ISAE) ( email )

Piazza dell' Indipendenza 4
I-00185
Italy

HOME PAGE: http://www.amedeoargentiero.com

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