Did Technology Shocks Cause the 1990–1991 Recession?

Real-business-cycle theory has been used to determine the statistical properties of aggregate fluctuations induced by technology shocks. The finding is that technology shocks have been an important contributor to fluctuations in the U.S. economy. For example, Finn E. Kydland and Prescott (1991) estimate that if the only impulses were technology shocks, the U.S. economy would have been 70 percent as volatile as it has been over the postwar period. In this paper we employ the theory to answer the question “Did technology shocks cause the 1990-1991 recession?”