Recent studies using long-run restrictions question the validity of the technology-driven real business cycle hypothesis. We propose an alternative identification that maximizes the contribution of technology shocks to the forecast-error variance of labor productivity at a long but finite...

Recent studies using long-run restrictions question the validity of the technology-driven real business cycle hypothesis. We propose an alternative identi cation that maximizes the contribution of technology shocks to the forecast-error variance of labor productivity at a long, but finite,...

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...

In a recent paper, Galí, López-Salido, and Vallées (2003) examined the Federal Reserve’s response to VAR-identified technology shocks. They found that during the Martin-Burns- Miller era, the Federal Reserve responded to technology shocks by overstabilizing output, while in the...

Structural vector autoregressions (SVARs) have become a standard tool used to determine the roles of monetary policy shocks in generating cyclical fluctuations in the United States. Using both long- and short-run identifying restrictions, various authors have explored the empirical response of...

Monetary policy VARs typically presume stability of the long-run outcomes. We introduce the possibility of switches in the long-run equilibrium in a cointegrated VAR by allowing both the covariance matrix and weighting matrix in the error-correction term to switch. We find that monetary policy...

The authors survey the recent empirical literature using long-run restrictions to identify technology shocks and provide an illustrative walk-through of the long-run restricted vector autoregression (VAR) methodology in a bivariate framework. Additionally, they offer an alternative...

In the wake of the Great Recession, the Federal Reserve lowered the federal funds rate target essentially to zero and resorted to unconventional monetary policy. With the nominal FFR constrained by the zero lower bound (ZLB) for an extended period, empirical monetary models cannot be estimated...

Factor models have become useful tools for studying international business cycles. Block factor models [e.g., Kose, Otrok, and Whiteman (2003)] can be especially useful as the zero restrictions on the loadings of some factors may provide some economic interpretation of the factors. These models,...

The nature of the business cycle appears to have changed. Prior to the 1990s, recoveries from recessions were quick and steep; after the past three recessions, however, recoveries were weak and prolonged. We consider the effect of a number of countercyclical policies intended to shorten...