Use this identifier to quote or link this document: http://hdl.handle.net/2072/261537

The Variance-Frequency Decomposition as an Instrument for VAR Identification: an Application to Technology Shocks
Lovcha, Yuliya; Pérez Laborda, Àlex
Universitat Rovira i Virgili. Departament d'Economia; Universitat Rovira i Virgili. Centre de Recerca en Economia Industrial i Economia Pública
Abstract: This paper proposes a new framework to study identification in structural VAR models. The framework is based on the variance-frequency decomposition and focuses on the contribution of the identified shock to the variance of model variables in a given frequency range. We use the hours-productivity debate as a connecting thread in our discussion since the identification problem has attracted a lot of attention in this literature. To start, we employ the framework to study the business cycle properties of a set of different identification schemes for technology shocks. Grounded on the simulation results, we propose a new model-based procedure which delivers a precise estimate of the response of hours. Finally, we put all the schemes to work with real data, obtaining substantial evidence in favor of plausible RBC parametrizations, especially from identification restrictions that perform better in simulations. This analysis also reveals that the schemes that recover a very strong response of hours (higher than the implied by typical RBC parameterizations) tend to overstate the contribution of the technology shock to the fluctuations of hours worked at business cycle frequencies. Keywords: Business cycle, frequency domain, hours worked, productivity, vector autoregressions. Classification: C1, E3
2016
33 - Economia
Cicles econòmics
L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons: http://creativecommons.org/licenses/by-nc-nd/3.0/es/
33 p.
Working Paper
Universitat Rovira i Virgili. Departament d'Economia
Documents de treball del Departament d'Economia;2016-09
         

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