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- At Vt In this case the model has a one sector representation (e.g. Greenwood et al. (2000)). Fur49 ther, one can readily redefine the investment sector TFP process as Vt = AtV ∗ t , where in this formulation At denotes sector neutral TFP, while V ∗ t denotes investment specific TFP. Under this equivalent formulation the expression above becomes, PI,t PC,t = (V ∗ t )−1 , a commonly used restriction in one sector estimated DSGE models. Thus, under assumptions (i)-(iii), one can identify the investment specific technology shock from the relative price of investment alone.
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- Gertler and Karadi (2011) state that the financial structure with a one period bond allows interpreting the external finance premium as a credit spread.
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- Investment Sector Spread Data Correlation: 0.03 Asset Value News Shocks Figure 7: Data (solid line) and counterfactual simulation (thin line) with all financial shocks only (left) or news shocks only (right). From top to bottom row: Output growth, investment growth, total hours, consumption sector credit spread, investment sector credit spread. Dark grey bars show NBER dated recessions. 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 −12 −10 −8 −6 −4 −2 0 2 4 6
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- Sectoral Hours. Disaggregated data on hours worked that is fully consistent with the concept of our series for aggregate hours (hours of all persons, non-farm business sector) are not available. To construct series for sectoral hours worked we use the product of all employees and average weekly hours of production and non-supervisory workers at the 2-digit level. This data is aggregated for the consumption and investment sector by using 2005 NAICS codes.
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- Then, total real consumption growth is obtained as the chained weighted (using the nominal shares above) growth rate of real services and growth rate of real non-durable goods. Using the growth rate of real consumption we construct a series for real consumption using 2005 as the base year. The consumption deflator is calculated as the ratio of nominal over real consumption.
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- Walsh, C. E. (1993). What caused the 1990-1991 recession? Economic Review, pages 33–48. 9 Appendix (For online publication) A Additional Results, Tables and Figures A.1 Robustness In this section we aim to assess the fit of the benchmark model in relation to plausible alternatives.
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