The Effects of a Technology Shock in the Euro Area
João Sousa (),
Sandra Gomes () and
José Brandão de Brito
Working Papers from Banco de Portugal, Economics and Research Department
The aim of this paper is to estimate the effects of a technology shock in the euro area within a structural VAR framework. Since the impact of these shocks on labor use is a controversial issue in the related literature, we give particular attention to it. Given that the estimated effects of a technology shock are quite sensible to the low-frequency properties of the labor input measure, we resort to an extensive statistical analysis to investigate whether hours worked are better characterized as stationary or difference stationary. We conduct a battery of classical unit root and stationary tests, analyze the small-sample properties of some of the tests-statistics, explore encompassing tests and Bayesian odds ratios to ascertain if the more appropriate VAR model is the one in which hours per capita enter in levels or first-differences. The evidence gathered is in support of hours being stationary, which leads to the conclusion that per capita hours worked rise after a technology shock in the euro area. As for the responses of the remaining variables, our results are in line with the bulk of the literature.
JEL-codes: E24 E32 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w200601
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