A Critique of Structural VARs Using Business Cycle Theory

@inproceedings{Chari2005ACO,
  title={A Critique of Structural VARs Using Business Cycle Theory},
  author={V. V. Chari and Patrick J. Kehoe and Ellen R. McGrattan},
  year={2005}
}
The main substantive finding of the recent structural vector autoregression literature with a differenced specification of hours (DSVAR) is that technology shocks lead to a fall in hours. Researchers have used these results to argue that business cycle models in which technology shocks lead to a rise in hours should be discarded. We evaluate the DSVAR approach by asking, is the specification derived from this approach misspecified when the data are generated by the very model the literature is… CONTINUE READING
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