If z is negative in period t, how would you think about that in non-mathematic terms? Do machines suddenly decide to temporally become less productive?
everyone loves their cell phone. suppose factual evidence is produced that these phones cause cancer. is that a wtf negative shock for you?
If z is negative in period t, how would you think about that in non-mathematic terms? Do machines suddenly decide to temporally become less productive?everyone loves their cell phone. suppose factual evidence is produced that these phones cause cancer. is that a wtf negative shock for you?
You must be a data science or compsci major
I know the supply curve has to shift inward if there is a negative shock. technology can't cause an inward shift. This is the usual bunk we get from straight jacket modern macro.Part of the problem is language: by technology all they (e.g., Prescott) mean is the technology that transforms aggregate capital and labor into aggregate output. So an increase in misallocation (factors moving into bad firms) is a reduction in technology in his sense.
Y=Af(K,L)
Y=C+I+G+X-M
A=(C+I+G+X-M)/f(K,L)
We know that f(K,L) doesn’t move much, C, G and X-M don’t move too much. It’s up to you to decide whether exogenous shocks to I cause movements in A or exogenous shocks in A cause movements in A.
Read the work on micro stories for Measured TFP shocks''...Lagos paper, Business Cycle Accounting etc. they are typically misallocation at a more micro level show up at the macro level as time-vary TFP. No one ever interprets negative productivity shocks as literally the technology parameter in front of the production function falling.
In a model without growth, a technology shock is relative to an average growth rate.
For example, if on average, technology improves output by 3% per annum, but in a particular year, the improvement of productivity was only 1%, in our standard models thats a 2% negative TFP shock, since we try to match demeaned changes in productivity.