This paper presents an aggregate demand-driven model of business cycles that provides a new explanation for the procyclicality of productivity and simultaneously predicts large welfare losses from monetary nonneutrality. The key features of the model are an input-output production structure;...

Yes. We construct a measure of aggregate technology change, controlling for aggregation effects, varying utilization of capital and labor, nonconstant returns, and imperfect competition. On impact, when technology improves, input use and nonresidential investment fall sharply. Output changes...