We estimate a dynamic stochastic general equilibrium (DSGE) model with several frictions and shocks, including news shocks to total factor productivity (TFP) and investment-speci c (IS) technology, using quarterly US data from 1954-2004 and Bayesian methods. When all types of shocks are considered, TFP news and IS news compete with other atemporal and intertemporal shocks and account for less than 1.5% and 0.15% of the unconditional variance of output growth, respectively. In the fleexible price-wage environment, the contributions of the two shocks are 2.4% and 0%, respectively. When we exclude an atemporal (price markup) shock, the role for TFP news rises but the t of that model is substantially poorer relative to the benchmark model. Based on the variance decompositions and impulse responses, our ndings suggest that news shocks are likely to be less important in estimated sticky price-wage DSGE models relative to perfectly competitive models.
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Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number
09-07.
Find related papers by JEL classification: E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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