The Adjusted Solow Residual and Asset Returns

東京大学経済学研究科棟 3階 第3教室

Jeong-Joon Lee 氏
Towson University

The purpose of this study is to examine effects of a measured
aggregate productivity shock on asset returns. To achieve this, a simple equilibrium business cycle model is presented to show that an aggregate productivity shock can be identified as a factor affecting asset returns. Then, Solow's productivity residual is chosen as a proxy for the measured aggregate productivity shock. One valuable contribution of the study is its incorporation of recent macroeconomic developments on variable factor utilizations. In particular, this paper deviates from the conventional growth accounting framework to adjust for cyclical variations of the Solow residual. This study first shows that asset returns tie with capital returns based on the standard business cycle model without adjustment costs, and then empirically evaluates the relationship between the measured aggregate productivity shock and asset returns. Investigations based on post-World War II U.S. data uncover significant differences between the conventional Solow residual and the adjusted Solow residual in their dynamic effects on asset returns. The results from the VARs show that once variable capital utilization is controlled for, the measured aggregate productivity shock generates dynamics similar to what Basu, Fernald, and Kimball (2004) documented. More importantly, technology improvements have delayed effects on asset returns, which is somewhat difficult to be rationalized based on the frictionless model studied in this paper.

備考: Macroworkshop と共催

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