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  • Francesco Giuli (a1) and Massimiliano Tancioni (a2)

This paper adds to the large body of literature on the effects of technology shocks empirically and theoretically. Using a structural vector error correction model, we first provide evidence that not only hours but also investment decline temporarily following a technology improvement. This result is robust to important data and identification issues addressed in the literature. We then show that the negative response of inputs is consistent with an estimated monetary model in which the presence of strategic complementarity in price setting, in addition to nominal rigidities, lowers the sensitivity of prices to marginal costs, and monetary policy does not fully accommodate the shock.

Corresponding author
Address correspondence to: Francesco Giuli, Department of Economics, Roma Tre University, Via Silvio D'Amico, 77, 00145 Rome, Italy; e-mail:
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We thank an associate editor and two anonymous referees for very useful feedback. We also thank Elton Beqiraj, Giuseppe Ciccarone, Enrico Marchetti, and Mario Tirelli for useful comments and discussions. The usual disclaimer holds. Financial support from the Roma Tre University, the Sapienza University of Rome, and the Ministero dell'Istruzione, dell'Università e della Ricerca (MIUR) is gratefully acknowledged.

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Macroeconomic Dynamics
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