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Identification of Technology Shocks in Structural VARs

  • Fève, Patrick
  • Guay, Alain

The usefulness of SVARs for developing empirically plausible models is actually subject to controversies in macroeconomics. We propose a two-step SVARs-based procedure which consistently estimates the effect of permanent technology shocks on aggregate variables. Simulation experiments from a standard business cycle model and a sticky prices 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 hump-shaped positive response. Additionally, the rate of inflation and the nominal interest rate displays a significant decrease after this shock. Copyright (C) The Author(s). Journal compilation (C) Royal Economic Society 2009.

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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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