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Technology Shock and Employment: Do We Really Need DSGE Models with a Fall in Hours?

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Author Info

  • Dupaigne, M.
  • Fève, P.
  • Matheron, J.

Abstract

The recent empirical literature that uses Structural Vector Autoregressions (SVAR) has shown that productivity shocks identified using long--run restrictions lead to a persistent and significant decline in hours worked. This evidence calls into question standard RBC models in which a positive technology shock leads to a rise in hours. In this paper, we estimate and test a standard RBC model using Indirect Inference on impulse responses of hours worked after technology and non-technology shocks. We find that this model is not rejected by the data and is able to produce impulse responses in SVAR from simulated data similar to impulse responses in SVAR from actual data. Moreover, technology shocks represent the main contribution to the variance of the business cycle component of output under the estimated DSGE model. Our results suggest that we do not necessarily need DSGE models with a fall in hours to reproduce the results deriving from SVAR models.

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Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 124.

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Length: 56 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:bfr:banfra:124

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Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
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Related research

Keywords: SVARs ; Long--Run Restrictions ; RBC models ; Indirect Inference;

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References

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Cited by:
  1. Matheron, Julien & Avouyi-Dovi, Sanvi, 2007. "Technology shocks and monetary policy : Revisiting the Fed's performance," Economics Papers from University Paris Dauphine 123456789/5491, Paris Dauphine University.

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