What does a technology shock do? A VAR analysis with model-based sign restrictions

Luca Dedola () and Stefano Neri

No 607, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper estimates the effects of technology shocks in VAR models of the U.S., identified by imposing restrictions on the sign of impulse responses. These restrictions are consistent with the implications of a popular class of DSGE models, with both real and nominal frictions, and with sufficiently wide ranges for their parameters. This identification strategy thus substitutes theoretically-motivated restrictions for the atheoretical assumptions on the time-series properties of the data that are key to long-run restrictions. Stochastic technology improvements persistently increase real wages, consumption, investment and output in the data; hours worked are very likely to increase, displaying a hump-shaped pattern. Contrary to most of the related VAR evidence, results are not sensitive to a number of specification assumptions, including those on the stationarity properties of variables.

Keywords: technology shocks; DSGE models; bayesian VAR methods; identification (search for similar items in EconPapers)
JEL-codes: C3 E3 (search for similar items in EconPapers)
Date: 2006-12
New Economics Papers: this item is included in nep-cba, nep-ets and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Related works:
Journal Article: What does a technology shock do? A VAR analysis with model-based sign restrictions (2007)
Working Paper: What does a technology shock do? A VAR analysis with model-based sign restrictions (2006)
Working Paper: What Does A Technology Shock Do? A VAR Analysis with Model-based Sign Restrictions (2004)
Working Paper: Are technology shocks contractionary? A Bayesian VAR analysis with priors on impulses responses (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_607_06

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