Sectoral and Aggregate Technology Shocks:Is There a Relationship?

We analyze sector-specific shocks in productivity and demand in 19 manufacturing sectors of the Austrian economy. Based on a structural vector autoregressive model (SVAR) with long-run restrictions developed by Galí (1999) we extract technology and non-technology shocks from sectoral and aggregate data. We study their patterns and relationship by means of a principal components analysis and find a close association of sectoral and macroeconomic non-technology shocks but only a very weak association for technology shocks. Impulse response analysis indicates that for almost all manufacturing sectors as well as the aggregate Austrian economy productivity growth rates experience an immediate increase due to positive technology shocks while hours worked decline. Thereby we confirm Galís results on the level of Austrian manufacturing industries. From regression analysis, we find that our shocks are closely associated to employment growth and output growth but not to investment growth and that the reaction is different for the aggregate economy and manufacturing industries.JEL codes: D24, E23, E32, O30We thank Werner Müller and the participants of the 2004 conference of the Austrian Economic Association (NOeG) for helpful comments. We would like to thank an anonymous referee for many helpful comments that led to a substantial improvement of the paper. The usual disclaimer applies. This research project was supported by a research Grant (Project Nr. 9800) of the Jubiläumsfonds der Österreichische Nationalbank (OeNB).