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Faculty of Economics

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Holly, S. and Petrella, I.

Factor demand linkages, technology shocks and the business cycle

Review of Economics and Statistics

Vol. 94(4) no. 4 pp. 948-963 (2012)

Abstract: his paper argues that factor demand linkages can be important for the transmission of both sectoral and aggregate shocks. We show this using a panel of highly disaggregated manufacturing sectors together with sectoral structural VARs. When sectoral interactions are explicitly accounted for, a contemporaneous technology shock to all manufacturing sectors implies a positive response in both output and hours at the aggregate level. Otherwise there is a negative correlation, as in much of the existing literature. Furthermore, we find that technology shocks are important drivers of the business cycle.

Author links: Sean Holly  

Publisher's Link: http://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00253?journalCode=rest



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