American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Unmeasured Investment and the Puzzling US Boom in the 1990s
American Economic Journal: Macroeconomics
vol. 2,
no. 4, October 2010
(pp. 88–123)
Abstract
For the 1990s, the basic neoclassical growth model predicts a depressed economy, when in fact the US economy boomed. We extend the base model by introducing intangible investment and non-neutral technology change with respect to producing intangible investment goods and find that the 1990s are not puzzling in light of this new theory. There is microeconomic and macroeconomic evidence motivating our extension, and the theory's predictions are in conformity with US national accounts and capital gains. We compare accounting measures with corresponding measures for our model economy and find that standard accounting measures greatly understate the 1990s boom. (JEL E22, E23, O33, O47)Citation
McGrattan, Ellen R., and Edward C. Prescott. 2010. "Unmeasured Investment and the Puzzling US Boom in the 1990s." American Economic Journal: Macroeconomics 2 (4): 88–123. DOI: 10.1257/mac.2.4.88Additional Materials
JEL Classification
- E22 Capital; Investment; Capacity
- E23 Macroeconomics: Production
- O33 Technological Change: Choices and Consequences; Diffusion Processes
- O47 Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence