- Applied Time Series (Macroeconometrics)
"The Time-Varying Response of Hours Worked to a Productivity Shock" (Job Market Paper) Appendix
Macroeconomists appear to have not reached a consensus about the response of hours worked to a total factor productivity (TFP) shock. This paper updates evidence on the TFP-hours worked relationship by extending Galí (1999). A TFP shock is identified as the only source of variation in average labor productivity in the long-run. I estimate a structural vector autoregression (SVAR) that includes time-varying parameters (TVPs) and stochastic volatility (SV) on average labor productivity and hours worked. The estimation follows Canova and Perez-Forero [2015. Estimating Overidentified, Non-recursive, Time-Varying Coefficients Structural VARs. Quantitative Economics]. This algorithm produces structural intercepts and slope parameters that are consistent with the long-run restriction. I find evidence in support for RBC and New Keynesian theories. The impulse response functions of hours worked with respect to a TFP shock are negative on impact and at the business cycle horizons. Results from forecast error variance decomposition show TFP shocks dominate the fluctuations of ALP. Time variation in the slope parameters and SV of the ALP regression are responsible for the conflicting evidence in the literature. The reasons for the breaks are several episodes of structural change, such as the productivity slowdown and the Great Recession.
"The Time-Varying and Volatile Macroeconomic Effects of Immigration"
This paper studies the impact of immigration on the U.S. macroeconomy. I identify structural vector autoregressions (SVARs) with time-varying parameters (TVPs) and stochastic volatility (SV) using a novel set of restrictions. The TVP-SV-SVARs are estimated on a sample including average labor productivity (ALP), hours worked, immigration, and consumption from 1969Q1 to 2014Q1. The data favors a TVP-SV-SVAR in which immigration does not respond to productivity, labor demand, and transitory consumption shocks at impact and ALP responds only to productivity and immigration supply shocks in the long-run. The impulse response functions change over the sample, especially around changes in immigration policy and NBER dated recessions. In contrast, the forecast error variance decompositions exhibit little change over the sample. Movements in immigration are explained by its own shock and to a lesser extent the productivity shock. Variation in ALP, hours worked, and consumption tend to be dominated by own shocks with the immigration supply shock playing little role.