Endogenous Technology Adoption and R&D as Sources of Business Cycle Persistence Article Swipe

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Slowdown Economics Recession Productivity Business cycle Endogenous growth theory Dynamic stochastic general equilibrium Monetary economics Developing country Macroeconomics Human capital Monetary policy Market economy Economic growth

Diego Anzoategui , Diego Comín , Mark Gertler , Joseba Martinez ·

YOU? · · 2016 · Open Access · · OA: W3121825379

We examine the hypothesis that the slowdown in productivity following the Great Recession was in significant part an endogenous response to the contraction in demand that induced the downturn. We motivate, develop and estimate a model with an endogenous TFP mechanism that allows for costly development and adoption of technologies. Our main finding is that a significant fraction of the post-Great Recession fall in productivity was an endogenous phenomenon, suggesting that demand factors played an important role in the post-crisis slowdown of capacity growth. More generally, we provide insight into why recoveries from financial crises may be so slow.