This paper documents large revisions in a widely used series of utilization-adjusted total factor productivity (TFP) by Fernald (2014) and shows that these revisions can materially affect empirical results about the effects of news shocks. We trace these revisions to changes in estimated factor utilization that are evocative of cyclical measurement issues with productivity. We propose an alternative identification that is robust to these measurement issues. Applied to U.S. data, the shock predicts delayed productivity growth while simultaneously generating strong responses of novel indicators of technological innovation and forward-looking variables. The shock does not lead to comovement in macroeconomic aggregates.
This paper combines the previous drafts by Sims (“Differences in Quarterly Utilization-Adjusted TFP by Vintage, with an Application to News Shocks,” March 2016) and Kurmann and Otrok (“New Evidence on the Relationship between News Shocks and the Slope of the Term Structure,” June 2016). We are grateful to John Fernald for helpful conversations and for generously sharing his code and data. We also thank Chris Otrok for earlier involvement, Susanto Basu and Silvia Miranda-Agrippino for thoughtful discussions, as well as Rudi Bachmann, Deokwoo Nam, Yuriy Gorodnichenko, several anonymous referees, and many seminar participants for comments.
A supplemental appendix is available online at https://doi.org/10.1162/rest_a_00896.