On the International Dissemination of Technology News

Abstract

This paper investigates the propagation of technology news shocks within and across industrialized economies. We construct utilization-adjusted total factor productivity (TFP) and labor productivity measures for twelve OECD countries. Based on a structural VAR, we document that (i) the max-share identification is able to recover essentially the same technology news shock process within a country irrespective of which productivity measure is considered; and (ii) the identified technology shock series display a significant degree of correlation across several countries. Furthermore, we find that the US are not the only major source of technological innovations impacting other advanced economies. In terms of underlying transmission mechanisms, technology news propagate through endogenous monetary policy to the slope of the term structure of interest rates and also via trade related variables. Our results imply that financial markets and trade are key channels for the dissemination of technology news shocks.