Technology Creation, Diffusion, and Growth Cycles

Standard macroeconomic models that assume an exogenous stochastic process for mul-tifactor productivity offer the interpretation that recessions are the result of ”bad news” (technological regress) and expansions are the result of ”good news ” (technological advance-ment). The view taken here is that both expansions and recessions are the result of ”good news ” in the sense that in both cases, aggregate production possibilities have increased. Recessions can be thought of as the transition from one technological frontier to the next