Bai, Yan;
Ríos-Rull, José-Víctor;
Storesletten, Kjetil;
(2025)
Demand Shocks as Technology Shocks.
The Review of Economic Studies
, Article rdaf045. 10.1093/restud/rdaf045.
(In press).
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Abstract
We provide a macroeconomic theory where demand for goods has a productive role. A search friction prevents perfect matching between producers and potential customers. Larger demand induces more search, which, in turn, increases GDP and measured total factor productivity (TFP). We embed the product-market friction in a standard neoclassical model and estimate it using Bayesian techniques. Business cycles are driven by preference shocks, true technology shocks, and investment-specific shocks. Preference shocks have qualitatively similar effects as true productivity shocks. These shocks account for a large share of the fluctuations in consumption, GDP, and measured TFP and can be identified using shopping time data.
| Type: | Article |
|---|---|
| Title: | Demand Shocks as Technology Shocks |
| DOI: | 10.1093/restud/rdaf045 |
| Publisher version: | https://doi.org/10.1093/restud/rdaf045 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher's terms and conditions. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10213866 |
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