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PERMANENT AND TRANSITORY SHOCKS, AND THE UK BUSINESS CYCLE

✍ Scribed by MORTEN O. RAVN

Publisher
John Wiley and Sons
Year
1997
Tongue
English
Weight
281 KB
Volume
12
Category
Article
ISSN
0883-7252

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✦ Synopsis

In this paper the business cycle properties of UK data are investigated using a VAR technique. A Real Business Cycle (RBC) model is formulated. The model includes both permanent and transitory shocks to technology. The business cycle properties of the data and the model are investigated by deriving the expected changes over various forecast horizons from a VAR model. It is found, contrary to evidence in Rotemberg and Woodford (1996), that the model can account for many features of the data and that temporary shocks are pertinent in order to explain the business cycle moments. The main dierence between theory and data is present in hours worked.

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