Shock Reactions in Digital Economy
Abstract
It has been recognized that technology is an important source of economic growth and fluctuation as it can produce potential effects on production productivity which in turn affect the national output and income. Hence the role of technology evolution on the dynamic of the economy has been studied extensively, especially in explaining the variation of the economy which is also known as the business cycle. Also, this work is in the same line of such study stream and hence was designed for expressing the role of digital technology proxied by the digital output on an economic fluctuation. To achieve our objective, we employed DSGE methodology and constructed a two-sector economy as well as proposed a new form of technology evolution to highlight the role of digital technology on an economic fluctuation. This fluctuation was investigated based on the Bayesian Estimation technique and the data of Thailand. The results of the analysis showed that advancement in technology can make the economy to be more sensitive and become more fluctuate than usual. Therefore integrating the effect of digital output into the traditional form of technology evolution should provide more ability to predict the variation in the digital economy than the traditional form. From the results of the analysis, we thus recommend that governments should recognize the effects of digital goods on economic fluctuation, business cycle in particular, in their policy formulation process.