Demand Shocks as Technology Shocks

Research

47 Pages

The authors propose a macro framework where demand can look like productivity because stronger demand induces more market search and matching. That framing challenges a common habit in markets and policy discussions: treating measured TFP improvements as purely supply driven.

Date published: June 9, 2025

Key Takeaways

TFP interpretation: Measured productivity can embed demand driven mechanisms, not just technology.
Cycle attribution: Preference style shocks can generate dynamics that resemble classic productivity shocks.
Policy reading: Stabilization choices may differ if demand is partly productive through market frictions.
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