Financial Management White Papers

A Flexible Finite-Horizon Identification of Technology Shocks

Overview Recent empirical studies using infinite horizon long-run restrictions question the validity of the technology-driven real business cycle hypothesis. These results have met with their own controversy, stemming from their sensitivity to changes in model specification and the general poor performance of long run restrictions in Monte Carlo experiments. This paper proposes an alternative identification that maximizes the contribution of technology shocks to the forecast error variance of labor productivity at a long, but finite horizon.

Further White Paper Details
PublisherFederal Reserve Board File FormatPDF
Date PublishedApril 2005 Downloads2
FormatWhite Papers   
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