Short-lived shocks and aggregate productivity

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Bibliographic Details
Author / Creator:Oberfield, Ezra.
Imprint:2010.
Description:85 p.
Language:English
Format: E-Resource Dissertations
Local Note:School code: 0330.
URL for this record:http://pi.lib.uchicago.edu/1001/cat/bib/8560884
Hidden Bibliographic Details
Other authors / contributors:University of Chicago.
ISBN:9781124377131
Notes:Advisor: Robert Shimer.
Thesis (Ph.D.)--The University of Chicago, Division of the Social Sciences, Department of Economics, 2010.
Dissertation Abstracts International, Volume: 72-02, Section: A, page: 0682.
Summary:Short-Lived Shocks and Aggregate Productivity: When firms face adjustment costs, measured aggregate TFP is low relative to a frictionless world because firms do not respond fully to idiosyncratic productivity shocks. A common shock that is expected to be short-lived can exacerbate these adjustment costs, leading to a less efficient allocation of resources and consequently lower measured aggregate TFP. This insight is used to explore the effect of a short-lived rise in world real interest rates on a small open economy. I find that such a shock can lead to a moderate drop in aggregate output and measured TFP.
Period Length and the Set of Dynamic Equilibria with Commodity Money: A property of the Kiyotaki and Wright model of commodity money as a medium of exchange is the multiplicity of dynamic equilibria as discussed in Kehoe et al (1993). We adapt the model to allow the meeting rate to depend on the length of the time period and focus on symmetric dynamic equilibria in a symmetric environment. With a time period of any fixed length, there is a large set of equilibria that includes cycles, sunspots, and other non-Markovian strategies, while in the continuous time limit there is a unique, rather simple, dynamic equilibrium. We characterize the set of points in the state-payoff space that are consistent with equilibrium as well as the set of possible dynamic paths of the state variable. Despite the multiplicity, for short period lengths all equilibrium paths are well approximated by the unique equilibrium of the continuous time limit.