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Article: Technology shocks and the business cycle
- Article from:
- Chicago Fed Letter
- Article date:
- March 1, 2003
- Author:
CopyrightCopyright Federal Reserve Bank of Chicago Mar 2003. Provided by ProQuest LLC. (Hide copyright information)
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Chicago Fed Letter
Previous research on the importance of technology shocks in understanding the business cycle emphasized the effects of neutral technological change that affects the production of consumption and investment goods symmetrically. New research shows that investment-- specific, not neutral, technological change, embodied in the investment good itself (a faster computer chip) or in the process for producing it, is a major source of the business cycle.
What drives the ups and downs in the pace of aggregate economic activity we call the business cycle? This is an enduring question with critical implications for determining the best approach to monetary and fiscal policy. The ...