Productivity, Energy Prices and the Great Moderation: A New Link

Pedro Silos, Karsten Jeske and Rajeev Dhawan ()
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Karsten Jeske: Federal Reserve Bank of Atlanta

No 877, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: We study how total factor productivity (TFP), energy prices and the great moderation are linked. First, we estimate a joint stochastic process for the energy price and TFP and establish that until 1982:II, energy prices negatively affected productivity. This spill-over has since disappeared. Second, we show that within the framework of a Dynamic Stochastic General Equilibrium (DSGE) model, the disappearance of this energy-productivity spill-over generates the significantly lower volatility of output and its components. Specifically, the change in the joint stochastic process accounts for close to 70 percent of the moderation in output volatility.

Date: 2008
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Related works:
Journal Article: Productivity, Energy Prices and the Great Moderation: A New Link (2010)
Working Paper: Productivity, energy prices, and the Great Moderation: a new link (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed008:877

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