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Identification of Technology Shocks in Structural VARs

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  • Fève, Patrick
  • Guay, Alain

Abstract

The usefulness of SVARs for developing empirically plausible models is actually subject to many controversies in quantitative macroeconomics. In this paper, we propose a simple alternative two step SVARs based procedure which consistently identifies and estimates the effect of permanent technology shocks on aggregate variables. Simulation experiments from a standard business cycle model show that our approach outperforms standard SVARs. The two step procedure, when applied to actual data, predicts a significant short-run decrease of hours after a technology improvement followed by a delayed and hump-shaped positive response. Additionally, the rate of inflation and the nominal interest rate displays a significant decrease after a positive technology shock.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 09-028.

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Date of creation: Mar 2009
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Publication status: Published in The Economic Journal, vol.�120, n°549, décembre 2010, p.�1284-1318.
Handle: RePEc:tse:wpaper:22266

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Cited by:
  1. Chaudourne, Jeremy & Fève, Patrick & Guay, Alain, 2012. "Understanding the Effect of Technology Shocks in SVARs with Long-Run Restrictions," IDEI Working Papers 738, Institut d'Économie Industrielle (IDEI), Toulouse.

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