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Technology Shocks and Hours Worked: Checking for Robust Conclusions

  • Whelan, Karl

    (Central Bank and Financial Services Authority of Ireland)

This paper presents some new results on the effects of technology shocks on hours worked based on structural VAR specifications containing various measures of US productivity growth and hours. These specifications can produce different answers depending on which sector of the economy is examined, which transformation of hours worked is used, and on how many lags are chosen for the VAR. However, it is shown that the results from the stochastic trend specification used by Jordi Galí (1999) are robust across changes in data definition and lag length, while the results from the per capita hours specification of Christiano, Eichenbaum, and Vigfusson (2003) are not. These results provide support for Galí’s findings that technology shocks have a negative impact effect o hours worked and that these shocks play a limited role in generating the business cycle.

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File URL: http://www.centralbank.ie/publications/documents/6RT04.pdf
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Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 6/RT/04.

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Length: 18 pages
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:cbi:wpaper:6/rt/04
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  1. Galí, Jordi & Rabanal, Pau, 2004. "Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Post-War US Data?," CEPR Discussion Papers 4522, C.E.P.R. Discussion Papers.
  2. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
  3. Neville Francis & Michael T. Owyang & Athena T. Theodorou, 2003. "The use of long-run restrictions for the identification of technology shocks," Working Papers 2003-010, Federal Reserve Bank of St. Louis.
  4. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Susanto Basu & John Fernald & Miles Kimball, 1998. "Are technology improvements contractionary?," International Finance Discussion Papers 625, Board of Governors of the Federal Reserve System (U.S.).
  6. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, vol. 89(1), pages 249-271, March.
  7. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," Cowles Foundation Discussion Papers 870, Cowles Foundation for Research in Economics, Yale University.
  8. Jordi Gali & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations: How Well Does the RBS Model Fit Postwar U.S. Data?," NBER Working Papers 10636, National Bureau of Economic Research, Inc.
  9. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What Happens After a Technology Shock?," NBER Working Papers 9819, National Bureau of Economic Research, Inc.
  10. Fernald, John G., 2007. "Trend breaks, long-run restrictions, and contractionary technology improvements," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2467-2485, November.
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