Endogenous TFP, business cycle persistence and the productivity slowdown

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dc.contributor Bank of Finland
dc.contributor.author Schmöller, Michaela
dc.contributor.author Spitzer, Martin
dc.date.accessioned 2019-09-18T11:10:58Z
dc.date.available 2019-09-18T11:10:58Z
dc.date.issued 2019
dc.identifier.isbn 978-952-323-296-9
dc.identifier.issn 1456-6184
dc.identifier.uri https://helda.helsinki.fi/bof/handle/123456789/16345
dc.description.abstract This paper analyses the procyclicality of euro area total factor productivity and its role in business cycle amplification by estimating a medium-scale DSGE model with endogenous productivity mechanism on euro area data. Total factor productivity evolves endogenously as a consequence of costly investment in R&D and adoption of new technologies. We find that the endogeneity of TFP induces a high degree of persistence in the euro area business cycle via a feedback mechanism between overall economic conditions and investment in productivity-enhancing technologies. As to the sources of the euro area productivity slowdown, we conclude that a decrease in the efficiency of R&D investment is among the key factors generating the pre-crisis productivity slowdown, while starting from the Great Recession an increase in liquidity demand is identified as the most important driving force. The endogenous technology mechanism further exerts a dampening effect on the inflation response over the business cycle which helps rationalizing both the negligible fall in inflation during the Great Recession and the sluggish increase of inflation in the subsequent recovery.
dc.format.extent 39
dc.language.iso ENG
dc.rights https://helda.helsinki.fi/bof/copyright
dc.subject R&D
dc.subject.other Endogenous Productivity
dc.subject.other Euro Area Business Cycles
dc.subject.other Weak Growth
dc.subject.other Low Inflation
dc.title Endogenous TFP, business cycle persistence and the productivity slowdown
dc.type Paper
dc.identifier.urn URN:NBN:fi:bof-201909181490
dc.subject.jel E24
dc.subject.jel E32
dc.subject.jel O31
dc.series.name Bank of Finland Research Discussion Papers
dc.series.year 2019
dc.series.number 21/2019
dc.series.sortingnumber 0021
dc.date.publication 18.9.2019
dc.subject.yso euroalue
dc.subject.yso tuottavuus
dc.subject.yso talouskasvu
dc.subject.yso inflaatio
dc.subject.yso suhdannevaihtelut
dc.subject.yso teknologia
dc.subject.yso tutkimus- ja kehittämistoiminta
dc.description.publication Published also in European Central Bank Working Paper Series 2401/2020 https://www.ecb.europa.eu/pub/research/working-papers/html/index.en.html
bof-internal.includedInCRIS 1
dc.type.okm D4

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