Asymmetric effects of shocks on TFP

ABSTRACT

We study the TFP distribution and examine the non-stationarity of productivity series at various quantiles. Using the quantile autoregression unit root test, we find that the US TFP exhibits an asymmetric adjustment dynamics, that is, positive and negative shocks might have different (permanent or temporary) effects on the TFP. Shocks dissemination depends on the local behaviour of the TFP. We find that positive shocks have permanent effects on the TFP, while negative shocks can potentially have only transitory effects.

KEYWORDS:

• TFP
• Unit root tests
• quantile autoregression

JEL CLASSIFICATION:

• C22
• E32
• O47

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ For Rabanal, Rubio-Ramírez, and Tuesta (2011)’s series, see their methodology section. The series of total factor productivity of Schmitt-Grohe and Uribe (2011) is taken from Beaudry and Lucke (2010). This time series covers the nonfarm business sector and it is adjusted for variations in capital capacity utilization. The original series of Fernald (2012) is the factor-utilization-adjusted TFP series. It is obtained from John Fernald’s website and is provided in terms of annualized percentage changes (i.e. 400 times changes in its logarithm). The quarterly TFP series in levels is recovered by dividing the original series by 400 and then cumulating the resulting series (Nam and Wang (2015)).

² We choose the lag length based on the MAIC criterion suggested by Ng and Perron (2001).

³ Hosseinkouchack and Wolters (2013) find that shocks either positive or negative, including large recessionary shocks have permanent effects on the real US GDP. Castro (2013) finds that the effect of the international financial crisis on the labour productivity in the United States is mainly due to a strong reduction of the TFP.