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Do SVAR Models Justify Discarding the Technology‐Shock‐Driven Real Business Cycle Hypothesis?
Author(s) -
Huh HyeonSeung,
Kim David
Publication year - 2014
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.12096
Subject(s) - business cycle , shock (circulatory) , technology shock , economics , vector autoregression , econometrics , structural vector autoregression , monetary economics , macroeconomics , dynamic stochastic general equilibrium , monetary policy , medicine
This study investigates the validity of technology shocks as a driving force of US business cycle fluctuations. Using three well‐known structural vector autoregression ( SVAR ) models, we analyse how structural shocks are associated with the variations of output and hours worked at business cycle frequencies. Empirical results reveal that technology shocks remain an important source of cyclical movements in output. Furthermore, a positive technology shock does not lead to a decline in hours worked, in contrast to previous studies. Our SVAR ‐based evidence does not support discarding a technology‐shock‐driven business cycle theory.