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Identification of Technology Shocks in Structural VARs

Listed author(s):
  • Fève, Patrick
  • Guay, Alain

The usefulness of SVARs for developing empirically plausible models is actually subject to many controversies in quantitative macroeconomics. In this paper, we propose a simple alternative two step SVARs based procedure which consistently identifies and estimates the effect of permanent technology shocks on aggregate variables. Simulation experiments from a standard business cycle 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 delayed and hump-shaped positive response. Additionally, the rate of inflation and the nominal interest rate displays a significant decrease after a positive technology shock.

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File URL: http://www.tse-fr.eu/sites/default/files/medias/doc/wp/macro/wp_macro_28_2009.pdf
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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
Publication status: Published in The Economic Journal, vol. 120, n°549, décembre 2010, p. 1284-1318.
Handle: RePEc:tse:wpaper:22266
Contact details of provider: Phone: (+33) 5 61 12 86 23
Web page: http://www.tse-fr.eu/

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