Propagation Through Endogenous Investment-Specific Technological Change
Working Paper No. 02-W23R
Gregory W. Huffman
ABSTRACT [article]
Many real business cycle models lack a significant propagation mechanism. Consequently most of the serial correlation in output is inherited from the serial correlation in the exogenous shocks. A simple model is presented to show there need not be any relationship between the serial correlation of the exogenous shocks, and that of output. This is accomplished by incorporating the well-documented fact that research spending has generated changes in the real price of capital.
Keywords and Phrases: Fluctuations, propagation, correlation, investment
JEL Classification Numbers: E1, E32