Why is Productivity Procyclical? A Model of Total Factor Productivity and its Role in the Business Cycle

2008 ◽  
Author(s):  
Eduard Gracia
Keyword(s):  
Business Cycle ◽  
Total Factor Productivity ◽  
Factor Productivity ◽  
The Business Cycle

scholarly journals Market Exposure and Endogenous Firm Volatility over the Business Cycle

2016 ◽  
Vol 8 (1) ◽  
pp. 148-198 ◽  
Author(s):  
Ryan A. Decker ◽  
Pablo N. D'Erasmo ◽  
Hernan Moscoso Boedo
Keyword(s):  
Theoretical Model ◽  
Business Cycle ◽  
Total Factor Productivity ◽  
Factor Productivity ◽  
Firm Level ◽  
Productivity Shocks ◽  
Demand Shocks ◽  
The Business Cycle ◽  
Total Factor Productivity Shocks

We propose a theory of endogenous firm-level risk over the business cycle based on endogenous market exposure. Firms that reach a larger number of markets diversify market-specific demand shocks at a cost. The model is driven only by total factor productivity shocks and captures the observed countercyclity of firm-level risk. Using a panel of US firms we show that, consistent with our theoretical model, measures of market reach are procyclical, and the counter-cyclicality of firm-level risk is driven by those firms that adjust their market exposure, which are larger than those that do not. (JEL D21, D22, E23, E32, L25)

scholarly journals Economic size of farms and adjustments of the total factor productivity to the business cycle in Polish agriculture  

2017 ◽  
Vol 63 (No. 2) ◽  
pp. 93-102
Author(s):  
 Czyzewski Bazyli ◽  
 Majchrzak Adam
Keyword(s):  
Business Cycle ◽  
Total Factor Productivity ◽  
Large Scale ◽  
Developed Countries ◽  
Factor Productivity ◽  
Input Output ◽  
The Real ◽  
Agricultural Income ◽  
The Business Cycle ◽  
Economic Size

The article presents an approach to changes in the total factor productivity (TFP) which differs from that generally found in the literature. Changes are calculated in the real terms using the detailed input-output matrices for representative farms in Poland, for different economic size classes, in the years 2007–2013. Input-output matrices were used for the decomposition of the Hicks-Moorsteen TFP index. The goal is to evaluate changes in the real TFP in the downturn and recovery phases of the business cycle in agriculture. It was found that the reaction of TFP to business cycle changes on “small”, “medium” and even “large” family farms in Poland is diametrically opposite to that observed in the case of large-scale farms. More than 90% of farms in Poland (except for the largest) increase technical productivity in the conditions of the economic downturn and lower it in the conditions of the economic recovery. Such behaviour is pro-cyclic and irrational, alluding to the 17th-century King’s effect, which is vanishing in the agricultural systems of highly developed countries. The hypothesis is proposed that the size of the price expectation error which causes that effect is negatively correlated with the economic size of the farm, but at the same time it is proportional to the percentage of agricultural income obtained from subsidies and other payments under the SAPS system.  

The financial accelerator and marketable debt: the prolongation channel

2018 ◽  
Vol 20 (1) ◽  
Author(s):  
Michael Kühl
Keyword(s):  
Business Cycle ◽  
Market Price ◽  
Market Value ◽  
Financial Accelerator ◽  
Factor Productivity ◽  
Net Worth ◽  
The Us ◽  
Monetary Policy Shock ◽  
The Business Cycle ◽  
Accounting Principle

Abstract This paper investigates the effects of mark-to-market accounting for risky liabilities on the business cycle. While marking assets to market results in an amplification of the business cycle, as is well-known from the financial accelerator model à la Bernanke, Gertler, and Gilchrist [Bernanke, B. S., M. Gertler, and S. Gilchrist. 1999. “The Financial Accelerator in a Quantitative Business Cycle Framework.” In Handbook of Macroeconomics, edited by J. Taylor and M. Woodford, Elsevier.], allowing for debt with a specific maturity priced at market value generates ambiguous effects. Changes in the market price of debt affects firms’ net worth since the accounting principle takes the perspective of repurchasing debt. This is called the prolongation channel of debt. Real economic activity is attenuated as long as asset and debt prices move in the same direction, whereas the response of debt prices is stronger. This happens for a monetary policy shock or a shock to total factor productivity. Amplification occurs if both prices move in opposite directions, as is the case for a demand shock. The implications for the business cycle eventually depend on the occurrence of shocks. Implementing mark-to-market accounting for liabilities in a model for the US yields a higher volatility of the business cycle.

scholarly journals PROCYCLICAL SOLOW RESIDUALS WITHOUT TECHNOLOGY SHOCKS

2009 ◽  
Vol 13 (3) ◽  
pp. 366-389 ◽  
Author(s):  
Andrew J. Clarke ◽  
Alok Johri
Keyword(s):  
Standard Deviation ◽  
Business Cycle ◽  
Total Factor Productivity ◽  
Learning By Doing ◽  
Real Business Cycle ◽  
Technology Shocks ◽  
Factor Productivity ◽  
Hard Time ◽  
Second Moments ◽  
Key Innovation

Most real business cycle models have a hard time jointly explaining the twin facts of strongly procyclical Solow residuals and extremely low correlations between wages and hours. We present a model that delivers both these results without using exogenous variation in total factor productivity (technology shocks). The key innovation of the paper is to add learning-by-doing to firms' technology. As a result, firms optimally vary their prices to control the amount of learning, which in turn influences future productivity. We show that exogenous variation in labor wedges (preference shocks) measured from aggregate data deliver around 50% of the standard deviation in the efficiency wedge (Solow residual) as well as realistic second moments for key aggregate variables, which is in sharp contrast to the model without learning-by-doing.

The Financial Foundations of the Productivity Puzzle

2017 ◽  
Vol 241 ◽  
pp. R48-R57 ◽  
Author(s):  
Jagjit S. Chadha ◽  
Amit Kara ◽  
Paul Labonne
Keyword(s):  
Financial Crisis ◽  
Total Factor Productivity ◽  
Service Sector ◽  
Labour Productivity ◽  
Financial Sector ◽  
Factor Productivity ◽  
Sectoral Productivity ◽  
The Business Cycle ◽  
The Uk

The financial crisis has led to a change in the mix of capital and labour employed in the UK and a sharp decline in total factor productivity. This has meant that labour productivity has not recovered to any great degree since the financial crisis. We explore the role of overall and sectoral productivity in explaining the fall in labour productivity, but also question the extent to which productivity in the service sector may be measured with error. We outline the links between a constrained financial sector and a fall in overall productivity – in which intangible capital seems to play an important role – and illustrate how a financial sector providing intermediate services may act to amplify the business cycle impetus from a total factor productivity shock within the context of a calibrated model.

An Analysis of Total Factor Productivity, Factor demand, and Profit of India’s Agriculture

2015 ◽  
Vol 6 (2) ◽  
pp. 360-370
Author(s):  
Sharmistha Nag ◽  
Debarpita Roy ◽  
Laxmi Joshi ◽  
P. C. Parida ◽  
Hari K. Nagarajan
Keyword(s):  
Total Factor Productivity ◽  
Factor Productivity ◽  
Factor Demand ◽  
Productivity Factor
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