Identification of Technology Shocks in Structural Vars

Patrick Fève and Alain Guay

Economic Journal, 2010, vol. 120, issue 549, 1284-1318

Abstract: 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.

Date: 2010
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Related works:
Working Paper: Identification of Technology Shocks in Structural VARs (2007)
Working Paper: Identification of Technology Shocks in Structural VARs (2006)
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