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Technology shocks and the business cycle: On empirical investigation

โœ Scribed by Peter N Ireland

Publisher
Elsevier Science
Year
2001
Tongue
English
Weight
181 KB
Volume
25
Category
Article
ISSN
0165-1889

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โœฆ Synopsis

This paper uses maximum likelihood to estimate a prototypical real business cycle model under several di!erent assumptions regarding the stochastic process governing technological change. The estimation approach permits the use of formal statistical hypothesis tests to help discriminate between competing speci"cations; the approach also allows each speci"cation to be evaluated based on its ability to generate accurate out-of-sample forecasts. Overall, the results indicate that the data prefer a version of the model in which technology shocks are extremely persistent but still trend stationary.

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