Stochastic demands, fixed costs and time-varying Solow residual

• Authors: Dudek Maciej
• Languages of publication: EN

Abstracts

EN

In a general equilibrium model that contains the standard RBC model as a special case we provide a novel and yet very intuitive interpretation of the Solow residual. We argue in a simple framework with a micro-level uncertainty and fixed costs that movements in the measured value of the Solow residual can reflect endogenous evolution in the stock of knowledge on the status of individual market demands. We establish that transitory shocks can have persistent effects as they exacerbate informational imperfections. In addition, the Solow residual is shown to fluctuate even though the technological frontier is time invariant and factors are fully employed. Finally, we argue that movements in the measured value of the TFP can be caused by monetary disturbances.

Keywords

EN

business cycles; demand uncertainty; Solow residual; fixed costs

• Publisher: Szkoła Główna Handlowa w Warszawie
• Journal: Prace i Materiały Instytutu Rozwoju Gospodarczego SGH
• Year: 2015
• Volume: 96: Analyzing and forecasting economic fluctuations
• Pages: 95-125

Dates

published

2015

Contributors

author

Dudek Maciej

• Akademia Finansów i Biznesu Vistula
• INE PAN

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Identifiers

ISSN

0866-9503