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Investment - Specific Technology Shocks and International Business Cycles: An Empirical Assessment

Investment - Specific Technology Shocks and International Business Cycles: An Empirical Assessment by International Monetary Fund
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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.
International Monetary Fund; September 2010
43 pages; ISBN 9781455239481
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Title: Investment - Specific Technology Shocks and International Business Cycles: An Empirical Assessment
Author: International Monetary Fund
 
ISBNs
1455239488
9781455204519
9781455205387
9781455239481