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Understanding the effect of technology shocks in SVARs with long-run restrictions

  • Chaudourne, Jeremy
  • Fève, Patrick
  • Guay, Alain

This paper studies the statistical properties of impulse response functions in structural vector autoregressions (SVARs) with a highly persistent variable as hours worked and long-run identifying restrictions. The highly persistent variable is specified as a nearly stationary persistent process. Such a process appears to be particularly well suited to characterize the dynamics of hours worked because it implies a unit root in a finite sample but is asymptotically stationary and persistent. This is typically the case for per capita hours worked which are included in SVARs. Theoretical results derived from this specification allow us to explain most of the empirical findings from SVARs which include US hours worked.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 41 (2014)
Issue (Month): C ()
Pages: 154-172

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Handle: RePEc:eee:dyncon:v:41:y:2014:i:c:p:154-172
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  17. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  18. Neville Francis & Valerie A. Ramey, 2009. "Measures of per Capita Hours and Their Implications for the Technology-Hours Debate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1071-1097, 09.
  19. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
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