When creativity strikes: news shocks and business cycle fluctuations

Silvia Miranda-Agrippino and Sinem Hacioglu Hoke

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We use monthly US utility patent applications to construct an external instrument for identification of technology news shocks in a rich-information VAR. Technology diffuses slowly, and affects total factor productivity in an S-shaped pattern. Responsible for about a tenth of economic fluctuations at business cycle frequencies, the shock elicits a slow, but large and positive response of quantities, and a sluggish contraction in prices, followed by an endogenous easing in the monetary stance. The ensuing economic expansion substantially anticipates any material increase in TFP. Technology news are strongly priced-in in the stock market on impact, but measures of consumers’ expectations take sensibly longer to adjust, consistent with a New-Keynesian framework with nominal rigidities, and featuring informationally constrained agents.

Keywords: technology news shocks; business cycle; identification with external instruments; patents applications. (search for similar items in EconPapers)
JEL-codes: E22 E23 E32 O33 O34 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: When creativity strikes: news shocks and business cycle fluctuations (2019)
Working Paper: When Creativity Strikes: News Shocks and Business Cycle Fluctuations (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:90381

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