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Investment Specific Technology Shocks and International Business Cycles: An Empirical Assessment

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Author Info

  • Federico Mandelman

    (Federal Reserve Bank of Atlanta)

  • Pau Rabanal

    (International Monetary Fund)

  • Juan Francisco Rubio-Ramirez

    (Duke University)

  • Diego Vilan

    (University of Southern California)

Abstract

In this paper, we first introduce investment-specific technology (IST) shocks to an otherwise standard international real business cycle model and show that a thoughtful calibration of them along the lines of Raffo (2009) successfully addresses the "quantity", "international comovement", "Backus-Smith", and "price" puzzles. Second, we use OECD data for the relative price of investment to build and estimate these IST processes across the U.S and a "rest of the world" aggregate, showing that they are cointegrated and well represented by a vector error correction model (VECM). Finally, we demonstrate that when we fit such estimated IST processes in the model instead of the calibrated ones, the shocks are actually not as powerful to explain any of the four mentioned puzzles. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 14 (2011)
Issue (Month): 1 (January)
Pages: 136-155

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Handle: RePEc:red:issued:09-242

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Related research

Keywords: International business cycles; Cointegration; Investment-specific technology shocks;

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  1. Investment-specific technology shocks and international business cycles: an empirical assessment
    by Christian Zimmermann in NEP-DGE blog on 2010-04-12 03:38:48
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