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Hours per Capita and Productivity: Evidence from Correlated Unobserved Components Models

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Author Info
Arabinda Basistha (Department of Economics, West Virginia University)

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Abstract

Recent studies debate the effect of a permanent productivity shock on hours per capita within a structural VAR context. This paper examines the issue using a correlated unobserved components (UC) framework. The estimates show that permanent shocks to productivity are negatively correlated with transitory shocks to hours. This result is robust for non-stationary, levels stationary and differenced stationary specifications of hours. A comparison of the UC framework to the structural VAR framework shows that the UC framework with hours in levels performs better.

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File URL: http://www.be.wvu.edu/div/econ//work/pdf_files/06-02.pdf
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File Function: First version, September 2006
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Publisher Info
Paper provided by Department of Economics, West Virginia University in its series Working Papers with number 06-02.

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Length: 33 pages
Date of creation: 2006
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Handle: RePEc:wvu:wpaper:06-02

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Related research
Keywords: Stochastic trend Correlated unobserved components model

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Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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