Berg, Tim Oliver (2011): Technology news and the U.S. economy: Time variation and structural changes.
Download (1MB) | Preview
This paper examines the time varying impact of technology news shocks on the U.S. economy during the Post-World War II era using a structural time varying parameter vector autoregressive (TVP-VAR) model. The identification restrictions are derived froma standard new Keynesian dynamic stochastic general equilibrium (DSGE) model and hold for a wide range of parameter constellations. In addition, the set of restrictions is sufficient to discriminate technology news shocks from other supply and demand side disturbances - technology surprise shocks among them. Overall, there is little evidence that the variance of technology news shocks or their transmission to real activity and inflation has changed over time. However, I detect significant time variation in the endogenous monetary policy reaction to technology news shocks; responding strongly to inflation most of the time, but less during the Great Inflation period. The evidence of this paper thus supports the hypothesis that the high inflation rates of the mid and late 1970s were the result of bad policy rather than bad luck.
|Item Type:||MPRA Paper|
|Original Title:||Technology news and the U.S. economy: Time variation and structural changes|
|Keywords:||technology news shocks, business cycles, monetary policy, DSGE models, structural time varying parameter VARs|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C11 - Bayesian Analysis: General
|Depositing User:||Tim Oliver Berg|
|Date Deposited:||12. Dec 2011 13:09|
|Last Modified:||24. Sep 2015 09:26|
Barsky, R. and E. Sims (2011). News shocks and business cycles. forthcoming in Journal of Monetary Economics.
Baumeister, C. and L. Benati (2010). Unconventional monetary policy and the Great Recession: Estimating the impact of a compression in the yield spread at the zero lower bound. ECB Working Paper No. 1258.
Baumeister, C. and G. Peersman (2008). Time-varying effects of oil supply shocks on the US economy. manuscript.
Beaudry, P. and F. Portier (2006). Stock prices, news, and economic fluctuations. American Economic Review 96(4), 1293–1307.
Blanchard, O. and J. Galí (2007). Real wage rigidities and the new Keynesian model. Journal of Money Credit and Banking 39, 35–65.
Blanchard, O. and J. Galí (2009). The macroeconomic effects of oil price shocks: Why are the 2000s so different from the 1970s? In J. Galí and M. Gertler (Eds.), International dimensions of monetary policy, pp. 373–428. University of Chicago Press.
Calvo, G. (1983). Staggered prices in a utility maximizing framework. Journal of Monetary Economics 12, 383–398.
Canova, F. and G. De Nicoló (2002). Monetary disturbances matter for business cycle fluctuations in the G-7. Journal of Monetary Economics 49, 1131–1159.
Canova, F. and L. Gambetti (2009). Structural changes in the US economy: Is there a role for monetary policy? Journal of Economic Dynamics and Control 33, 477–490.
Canova, F., L. Gambetti, and E. Pappa (2007). The structural dynamics of output growth and inflation: Some international evidence. The Economic Journal 117, 167–191.
Canova, F. and M. Paustian (2010). Measurement with some theory: A new approach to evaluate business cycle models. manuscript.
Carter, C. K. and R. Kohn (1994). On Gibbs sampling for state space models. Biometrika 81, 541–553.
Christiano, L. J., C. Ilut, R. Motto, and M. Rostagno (2010). Monetary policy and stock market booms. manuscript.
Christiano, L. J., M. Trabandt, and K. Walentin (2011). DSGE models for monetary policy analysis. In B. M. Friedman and M. Woodford (Eds.), Handbook of Monetary Economics. North-Holland.
Christoffel, K., K. Kuester, and T. Linzert (2009). The role of labor markets for euro area monetary policy. European Economic Review 53, 908–936.
Christoffel, K. and T. Linzert (2010). The role of real wage rigidity and labor market rigidities for inflation persistence. Journal of Money, Credit and Banking 42(7), 1435–1446.
Clarida, R., J. Galí, and M. Gertler (2000). Monetary policy rules and macroeconomic stability: Evidence and some theory. Quarterly Journal of Economics 115(1), 147–180.
Cogley, T. and T. J. Sargent (2001). Evolving Post-World War II U.S. inflation dynamics. NBER Macroeconomics Annual 16, 331–388.
Dedola, L. and S. Neri (2007). What does a technology shock do? A VAR analysis with modelbased sign restrictions. Journal of Monetary Economics 54, 512–549.
Fratzscher, M. and R. Straub (2010). Asset prices, news shocks and the current account. CEPR Discussion Paper No. 8080.
Fry, R. and A. Pagan (2010). Sign restrictions in structural vector autoregressions: A critical review. CAMA Working Paper 22/2010.
Galí, J. (2008). Monetary policy, inflation, and the business cycle. Princeton University Press.
Galí, J. and L. Gambetti (2009). On the sources of the Great Moderation. American Economic Journal: Macroeconomics 1, 26–57.
Gambetti, L., E. Pappa, and F. Canova (2008). The structural dynamics of U.S. output and inflation: What explains the changes? Journal of Money, Credit and Banking 40, 369–388.
Gelman, A., J. B. Carlin, H. S. Stern, and D. B. Rubin (1995). Bayesian data analysis. Chapman and Hall, London.
Hofmann, B., G. Peersman, and R. Straub (2010). Time variation in U.S. wage dynamics. ECB Working Paper No. 1230. 25
Jaimovich, N. and S. Rebelo (2009). Can news about the future drive the business cycle? American Economic Review 99(4), 1097–1118.
Kim, S., N. Shepard, and S. Chib (1998). Stochastic volatility: Likelihood inference and comparison with ARCH models. Review of Economic Studies 65, 361–393.
Kirchner, M., J. Cimadomo, and S. Hauptmeier (2010). Transmission of government spending shocks in the euro area: Time variation and driving forces. ECB Working Paper No. 1219.
Lubik, T. A. and F. Schorfheide (2004). Testing for indeterminacy: An application to U.S. monetary policy. American Economic Review 94(1), 190–217.
Peersman, G. and R. Straub (2009). Technology shocks and robust sign restrictions in a euro area SVAR. International Economic Review 50(3), 727–750.
Pereira, M. C. and A. S. Lopes (2010). Time varying fiscal policy in the U.S. manuscript.
Primiceri, G. E. (2005). Time varying structural vector autoregressions and monetary policy. Review of Economic Studies 72, 821–852.
Schmitt-Grohé, S. and M. Uribe (2008). What’s news in business cycles. manuscript.
Sims, C. A. and T. Zha (2006). Were there regime switches in U.S. monetary policy? American Economic Review 96(1), 54–81.
Taylor, J. B. (1993). Discretion versus policy rules in practice. Carnegie-Rochester Series on Public Policy 39, 195–214.
Uhlig, H. (2005). What are the effects of monetary policy on output? Results from an agnostic identification procedure. Journal of Monetary Economics 52, 381–419. 26