THE HOURS WORKED–PRODUCTIVITY PUZZLE: IDENTIFICATION IN A FRACTIONAL INTEGRATION SETTING

Yuliya Lovcha () and Alejandro Perez-Laborda

Macroeconomic Dynamics, 2015, vol. 19, issue 7, 1593-1621

Abstract: A recent finding of the SVAR literature is that the response of hours worked to a (positive) technology shock depends on the assumed order of integration of the hours. In this work we relax this assumption, allowing fractional integration in hours and productivity. We find that the sign and magnitude of the estimated responses depend crucially on the identification assumptions employed. Although the responses of hours recovered with short-run (SR) restrictions are positive in all data sets, long-run (LR) identification results in negative, although sometimes not significant responses. We check the validity of these assumptions with the Sims procedure, concluding that both LR and SR are appropriate to recover responses in a fractionally integrated VAR. However, the application of the LR scheme always results in an increase in sampling uncertainty. Results also show that even the negative responses found in the data could still be compatible with real business cycle models.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:19:y:2015:i:07:p:1593-1621_00

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().