R&D and Aggregate Fluctuations
Empirical observations raise interesting questions regarding the sources of the excessive volatility in the R&D sector as well as the nature of the relation between the sector and aggregate fluctuations. Using US data for the period 1959–2007, we identify sectoral technology and capital investment-specific shocks by employing a Vector Autoregression. The identifying assumptions are motivated by a two-sector dynamic general equilibrium model. Controlling for real and nominal factors, we find that capital investment-specific shocks explain 70 percent of fluctuations of R&D investment, while R&D technology shocks explain 30 percent of the variation of aggregate output, net of R&D investment. Technology shocks jointly explain almost all the variation of output in the R&D sector and 78 percent of the variation of output in the rest of the economy. They also constitute the main factor of the procyclicality of R&D investment.
| Main Authors: | , |
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| Format: | Journal Article biblioteca |
| Language: | en_US |
| Published: |
Elsevier
2014-08-01
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| Subjects: | Cycles, Technology shocks, Business cycles, Investment-specific shocks, R&D, VAR, |
| Online Access: | http://hdl.handle.net/10986/21412 |
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