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Revisions in Utilization-Adjusted TFP and Robust Identification of News Shocks

André Kurmann¹; Eric Sims²

¹ Drexel University · ² University of Notre Dame and NBER

Abstract This paper documents large revisions in a widely used series of utilization-adjusted total factor productivity (TFP) by Fernald (2014) and shows that these revisions can materially affect empirical results about the effects of news shocks. We trace these revisions to changes in estimated factor utilization that are evocative of cyclical measurement issues with productivity. We propose an alternative identification that is robust to these measurement issues. Applied to U.S. data, the shock predicts delayed productivity growth while simultaneously generating strong responses of novel indicators of technological innovation and forward-looking variables. The shock does not lead to comovement in macroeconomic aggregates.

DOI

10.1162/rest_a_00896

Volume

103 (2)

Pages

216-235

Language

en

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