Mapping prices into productivity in multisector growth models

  • Ngai L
  • Samaniego R
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This paper argues that factor demand linkages are crucial in 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 business cycles.

Author-supplied keywords

  • Growth accounting
  • Intermediate goods
  • Investment-specific technical change
  • Multisector growth models
  • Value added

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  • L. Rachel Ngai

  • Roberto M. Samaniego

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