Non-stationary hours in a DSGE model
Yongsung Chang (),
Taeyoung Doh and
Frank Schorfheide ()
No 06-3, Working Papers from Federal Reserve Bank of Philadelphia
The time series fit of dynamic stochastic general equilibrium (DSGE) models often suffers from restrictions on the long-run dynamics that are at odds with the data. Relaxing these restrictions can close the gap between DSGE models and vector autoregressions. This paper modifies a simple stochastic growth model by incorporating permanent labor supply shocks that can generate a unit root in hours worked. Using Bayesian methods we estimate two versions of the DSGE model: the standard specification in which hours worked are stationary and the modified version with permanent labor supply shocks. We find that the data support the latter specification.
Keywords: Labor supply; Hours of labor (search for similar items in EconPapers)
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Journal Article: Non-stationary Hours in a DSGE Model (2007)
Journal Article: Non‐stationary Hours in a DSGE Model (2007)
Working Paper: Non-stationary Hours in a DSGE Model (2005)
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