No news in business cycles

Mario Forni, Luca Gambetti and Luca Sala ()

Center for Economic Research (RECent) from University of Modena and Reggio E., Dept. of Economics "Marco Biagi"

Abstract: This paper uses a structural, large dimensional factor model to evaluate the role of `news' shocks (shocks with a delayed effect on productivity) in generating the business cycle. We find that (i) existing small-scale VECM models are affected by `non-fundamentalness' and therefore fail to recover the correct shock and impulse response functions; (ii) news shocks have a limited role in explaining the business cycle; (iii) their effects are in line with what predicted by standard neoclassical theory; (iv) the bulk of business cycle flucuations is explained by shocks unrelated to technology.

Keywords: structural factor model; news shocks; invertibility; fundamentalness (search for similar items in EconPapers)
JEL-codes: C32 E32 E62 (search for similar items in EconPapers)
Pages: pages 32
Date: 2011-06
New Economics Papers: this item is included in nep-bec, nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Working Paper: No News in Business Cycles (2015)
Journal Article: No News in Business Cycles (2014)
Working Paper: No News in Business Cycles (2013)
Working Paper: No News in Business Cycles (2011)
Working Paper: No News in Business Cycles (2011)
Working Paper: No News in Business Cycles (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:mod:recent:063

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