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Investment - Specific Technology Shocks and International Business Cycles: An Empirical Assessment
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Author/Editor: |
Rabanal, Pau | Mandelman, Federico | Rubio-Ramirez, Juan F. | Vilan, Diego |
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September 1, 2010 |
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Electronic Access: |
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: In this paper, we first introduce investment-specific technology (IST) shocks to an otherwise standard international real business cycle model and show that a thoughtful calibration of them along the lines of Raffo (2009) successfully addresses the "quantity", "international comovement", "Backus-Smith", and "price" puzzles. Second, we use OECD data for the relative price of investment to build and estimate these IST processes across the U.S and a "rest of the world" aggregate, showing that they are cointegrated and well represented by a vector error correction model (VECM). Finally, we demonstrate that when we fit such estimated IST processes in the model instead of the calibrated ones, the shocks are actually not as powerful to explain any of the four montioned puzzles.
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Order a print copy
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Series: |
Working Paper No. 10/207 |
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Subject(s): |
Business cycles | Consumption | Cross country analysis | Demand | Economic models | External shocks | International trade | Investment | Productivity | United States |
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Author's keyword(s): |
International Business Cycles
| Cointegration
| Investment-Specific Technology Shocks
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Published: |
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September 1, 2010 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2010207 |
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Pages: |
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43 |
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Price: |
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US$18.00 (Academic Rate: US$18.00 )
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