Date of Award


Degree Type


Degree Name

Doctor of Philosophy


Traditionally, theories of the business cycle have assumed that technological change is exogenous to the economic process, although there is considerable evidence that changes in technology depend on economic factors. This thesis examines the implications of endogenous technology for business cycle theory. It constructs two basic general models of output fluctuations. In the first model technical knowledge advances through learning by doing and in the second case there exists an innovation production function and technical progress depends on R&D. Nested within the two general models are both real and monetary business cycle models, so enabling comparisons between monetary models with endogenous technology and conventional monetary models (with exogenous technology), between real business cycle models with endogenous technology and conventional real business cycle models, and between monetary models with endogenous technology and conventional real business cycle models.;The major findings are as follows: Firstly, there is a long-run non-neutrality of money in models with endogenous technology, because monetary innovations can alter technology and so permanently shift the time path of output. Secondly, money is not superneutral in the models with endogenous technology, nor is the conditional probability distribution of output invariant with respect to changes in the money supply rule. Thirdly, as regards the real business cycle models, if technology is endogenous, even a temporary change in productivity can have permanent affects on output because it can change the level of technology. Finally, in both the real and monetary models with endogenous technology, output is non-stationary and exhibits a greater-than-unit root, implying that the growth rate of output increases over time. This stands in strong contrast to conventional monetary models (where the output process is stationary) and conventional real models (where output has at most a unit root). The thesis also considers the implications of wage indexation and of allowing technology to depreciate.;The conclusions of the thesis are that the influence of real and monetary shocks on the economy is very different when technology is endogenous than when it is treated as exogenous and it suggests that business cycle models that ignore the endogeneity of technology can give misleading results.



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