The time series fit of dynamic stochastic general equilibrium (DSGE) models often suffers from restrictions on the long-run dynamics that are at odds with the data. Relaxing these restrictions can close the gap between DSGE models and vector autoregressions. This paper modifies a simple...

This paper suggests that skill accumulation through past work experience, or "learning-by-doing", can provide an important propagation mechanism for initial shocks, as the current labor supply affects future productivity. Our econometric analysis uses a Bayesian approach to combine micro-level...