Identifying technology shocks in the frequency domain
AbstractSince Galí , long-run restricted VARs have become the standard for identifying the effects of technology shocks. In a recent paper, Francis et al.  proposed an alternative to identify technology as the shock that maximizes the forecast-error variance share of labor productivity at long horizons. In this paper, we propose a variant of the Max Share identification, which focuses on maximizing the variance share of labor productivity in the frequency domain. We consider the responses to technology shocks identified from various frequency bands. Two distinct technology shocks emerge. An expansionary shock increases productivity, output, and hours at business-cycle frequencies. The technology shock that maximizes productivity in the medium and long runs instead has clear contractionary effects on hours, while increasing output and productivity.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2010-025.
Date of creation: 2010
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-14 (All new papers)
- NEP-BEC-2010-08-14 (Business Economics)
- NEP-ECM-2010-08-14 (Econometrics)
- NEP-EFF-2010-08-14 (Efficiency & Productivity)
- NEP-ETS-2010-08-14 (Econometric Time Series)
- NEP-MAC-2010-08-14 (Macroeconomics)
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