Specification and the Technology-Hours Debate: What Can We learn from Bayesian VARSs?
Many recent papers, following Gali (1999), have found a negative response of employment to a positive technology shock identified as a permanent shock to labor productivity, contradicting the prediction of standard RBC models. In a recent paper, Christiano, Eichenbaum and Vigfusson (2003) get a positive response of employment measured by hours per capita when Galiâ€™s assumption of a unit root in hours is relaxed. In this paper, we propose a new specification test to disentangle for the level/first difference models. We calculate posterior probabilities of various specifications of productivity-hours VARs using Bayes factors, measured by the Laplace approximation and by the posterior information criterion suggested by Phillips (1995, 1996) and Phillips and Ploberger (1994). Our results strongly support the results of CEV, namely, a specification of hours in levels rather than differences. However, resulting level VAR implies impulse responses , variance decompositions and conditional correlations with distributions so wide that meaningful inference of the role of technology shocks in business cycles is impossible
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
When requesting a correction, please mention this item's handle: RePEc:sce:scecf5:289. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.