On This PageMarch 2003, No. 187

Technology Shocks and the Business Cycle
Last Updated: 02/13/03

Previous research on the importance of technology shocks in understanding the business cycle emphasized the effects of neutral technological change that affects the production of consumption and investment goods symmetrically. New research shows that investmentspecific, not neutral, technological change, embodied in the investment good itself (a faster computer chip) or in the process for producing it, is a major source of the business cycle.