TY  - UNPB
UR  - https://mpra.ub.uni-muenchen.de/3589/
AV  - public
KW  - Business Cycle; Aggregate fluctuations; Technology Shocks; Unit Roots
EP  - 47
TI  - Technology Shocks, Statistical Models, and The Great Moderation
N1  - Unpublished
Y1  - 2007/06/01/
ID  - mpra3589
N2  - In this paper we compare the cyclical features implied by an RBC model with two
technology shocks under several statistical specifications for the stochastic processes
governing technological change. We conclude that while a trend-stationary model
accounts better for the observed volatilities, a difference-stationary model does a relatively
better job of accounting for the correlation of the variables of interest with
output. We also explore some counterfactuals to assess the ability of our model to
replicate the volatility slowdown of the mid 1980s. First, we conclude that the stochastic
growth model outperforms the deterministic growth model in accounting for the
Great Moderation. Finally, we obtain that even though the neutral technology shock
is the main driving force in the volatility slowdown, allowing for a larger financial flexibility
in the form of a smaller volatility for the investment-specific innovation improves
the ability of our model to account for the magnitude of the Great Moderation.
A1  - Fuentes-Albero, Cristina
ER  -