R&D and aggregate fluctuations

Artuç, Erhan and Pourpourides, Panayiotis M. ORCID: https://orcid.org/0000-0002-2986-4094 2014. R&D and aggregate fluctuations. Journal of Economic Dynamics and Control 47 , pp. 54-71. 10.1016/j.jedc.2014.07.006

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Abstract

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.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Uncontrolled Keywords:	Cycles; Technology shocks; Investment-specific shocks; R&D; VAR
Additional Information:	Pdf uploaded in accordance with the publisher’s policy at http://www.sherpa.ac.uk/romeo/issn/0165-1889/ (accessed 26/11/2014)
Publisher:	Elsevier
ISSN:	0165-1889
Date of First Compliant Deposit:	30 March 2016
Date of Acceptance:	14 July 2014
Last Modified:	07 Nov 2024 12:00
URI:	https://orca.cardiff.ac.uk/id/eprint/65678

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