Int Adv Econ Res (2018) 24:107–108 https://doi.org/10.1007/s11294-018-9670-3 RESEARCH NOTE Differences in Response to Productivity Shock Depending on Economic Development Stages Inyong Shin Published online: 1 February 2018 International Atlantic Economic Society 2018 . . JEL E30 O10 O40 Previous business cycle studies (e.g., Kydland and Prescott, Econometrica, 1982; Hansen, Journal of Monetary Economics, 1985; King et al. Journal of Monetary Economics, 1988) have analyzed the response of economic variables to productivity shocks when these shocks occur in the long-run steady state. However, if many countries are still on a transitional path, it would be more appropriate for those countries to be analyzed on their transitional path rather than in this steady state which is still unreachable. We became interested in analyzing productivity shocks that occur along the transitional path, because most countries do not reach a steady state except for a few developed countries. We found that the response of economic variables to an exoge- nous total factor productivity shock was state-dependent. We used the standard real business cycle (RBC) model with a log-log utility function and Cobb-Douglas production function. We also used the following well-known parameter values: capital share = 1/3, discount factor = 0.99, depreciation rate =
International Advances in Economic Research – Springer Journals
Published: Feb 1, 2018
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