This paper investigates the validity of technology shocks as a driving force of U.S. business cycle fluctuations. Using three well-known structural vector autoregression (SVAR) models, we analyze how structural shocks are associated with the variations of output and hours worked at business...

Many people are not free from past sunk costs in their decision making processes, even though economic theory tells them to forget the sunk costs. In this paper we will show that it can be a rational behavior for the people not to forget the sunk cost when people are concerned with their future...

We develop a method of testing linearity using power transforms of regressors, allowing for stationary processes and time trends. The linear model is a simplifying hypothesis that derives from the power transform model in three different ways, each producing its own identification problem. We...

We provide mathematical proofs for the results in "Testing Linearity Using Power Transforms of Regressors" by Baek, Cho, and Phillips (2014).