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THE SOLOW RESIDUAL FOR AUSTRALIA: TECHNOLOGY SHOCKS OR FACTOR UTILIZATION?
Author(s) -
Otto Glenn
Publication year - 1999
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1999.tb01421.x
Subject(s) - solow residual , residual , economics , econometrics , shock (circulatory) , vector autoregression , growth accounting , macroeconomics , total factor productivity , mathematics , productivity , medicine , algorithm
This paper presents evidence which implies that fluctuations in the Solow residual for Australia do not solely reflect technology shocks. Recent work suggests that the Solow residual is a noisy measure of technology shocks. One source of noise in the standard measure of the Solow residual is changes in factor utilization. In this paper a structural vector autoregression model for capacity utilization and the Solow residual is estimated. A transitory shock is identified that accounts, for about 30% of the short term variation in the Solow residual and virtually 100% of the variation in capacity utilization at all horizons. ( JEL E3, E32, O4)