A flexible finite-horizon alternative to long-run restrictions with an application to technology shock

Riccardo DiCecio, Neville Francis, Michael Owyang and Jennifer E. Roush

No 2005-024, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Recent studies using long-run restrictions question the validity of the technology-driven real business cycle hypothesis. We propose an alternative identi cation that maximizes the contribution of technology shocks to the forecast-error variance of labor productivity at a long, but finite, horizon. In small-sample Monte Carlo experiments, our identification outperforms standard long-run restrictions by significantly reducing the bias in the short-run impulse responses and raising their estimation precision. Unlike its long-run restriction counterpart, when our Max Share identification technique is applied to U.S. data it delivers the robust result that hours worked responds negatively to positive technology shocks. ; Earlier title: A flexible finite-horizon identification of technology shocks

Keywords: time series analysis; Business cycles (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (22)

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Journal Article: A Flexible Finite-Horizon Alternative to Long-Run Restrictions with an Application to Technology Shocks (2014)
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DOI: 10.20955/wp.2005.024

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