TECHNOLOGY DIFFUSION AND BUSINESS CYCLE ASYMMETRY

Toshiya ISHIKAWA (Kyushu Kyoritsu University)

The goal of this paper is to theoretically account for some kinds of business cycle asymmetries, such as "deepness" and "steepness." The former means that recessions are deeper than expansions are tall, and the latter that recessions are steeper than expansions. See Sichel (1993) and Ramsey and Rothman (1996). In this paper, we introduce the process of technology diffusion and learning like general purpose technology in the framework of real business cycles. The model is a standard real business cycle model, except for some kind of technology diffusion and variable labor effort. I assume that a positive innovation to technology diffuses over the economy with some time lag, while a negative one without any lag. A positive shock in the present makes the near-future level of productivity higher than the present level as a result of technology diffusion. Because of intertemporal substitution behavior, it leads to a recession in the present and then the subsequent expansion. In contrast, a negative innovation immediately generates a recession. Especially, when the S-shaped technology diffusion process is assumed, a positive shock can induce a deeper and steeper recession. This is a theoretical explanation of "deepness" and "steepness."