Does cointegration matter? An analysis in a RBC perspective

Laura Bisio () and Faccini Andrea

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Abstract: The aim of this paper is to verify if a proper SVEC representation of a standard Real Business Cycle model exists even when the capital stock series is omitted. The argument is relevant as the common unavailability of su¢ ciently long medium-frequency capital series prevent researchers from including capital in the widespread structural VAR (SVAR) representations of DSGE models - which is supposed to be the cause of the SVAR biased estimates. Indeed, a large debate about the truncation and small sample bias a¤ecting the SVAR performance in approximating DSGE models has been recently rising. In our view, it might be the case of a smaller degree of estimates distorsions when the RBC dynamics is approximated through a SVEC model as the information provided by the cointegrating relations among some variables might compensate the exclusion of the capital stock series from the empirical representation of the model.

Keywords: RBC; SVAR; SVEC model; cointegration (search for similar items in EconPapers)
JEL-codes: C32 C52 E27 E32 (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-bec, nep-dge, nep-ecm and nep-mac
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Working Paper: Does Cointegration Matter? An Analysis in a RBC Perspective (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ter:wpaper:0066

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