Good news about news shocks

Viktoria C. E. Langer
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Viktoria C. E. Langer: Chair for Economic Policy, University of Hamburg

No 53, Working Papers from Chair for Economic Policy, University of Hamburg

Abstract: Extending and modifying the canonical New Keynesian (NK) model, this study provides a novel approach to examine the impact of anticipated shocks called “news shocks” on business cycles. The analysis shows that news shocks are less stressful for an economy than commonly assumed. The main results are as follows: (1) triggering lower economic fluctuations than unanticipated shocks of equal size news shocks behave in a welfare-enhancing manner, and (2) purely history-dependent monetary policy rules do not constitute an effective monetary instrument to keep welfare losses to a minimum.

Keywords: Anticipated shock; welfare; business cycle; monetary policy (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2015-10-26
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published in Hamburg Contemporary Economic Discussions, Issue 53, 2015

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Persistent link: https://EconPapers.repec.org/RePEc:hce:wpaper:053

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