News, Noise, and Fluctuations: An Empirical Exploration

Olivier Blanchard, Jean-Paul L’Huillier () and Guido Lorenzoni ()
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Jean-Paul L’Huillier: EIEF
Authors registered in the RePEc Author Service: Jean-Paul L'Huillier

No 09/2012, Development Research Working Paper Series from Institute for Advanced Development Studies

Abstract: We explore empirically models of aggregate fluctuations with two basic ingredients: agents form anticipations about the future based on noisy sources of information and these anticipations affect spending and output in the short run. Our objective is to separate fluctuations due to actual changes in fundamentals (news) from those due to temporary errors in agents’ estimates of these fundamentals (noise). We use a simple forward-looking model of consumption to address some methodological issues: structural VARs cannot be used to identify news and noise shocks in the data, but identification is possible via a method of moments or maximum likelihood. Next, we use U.S. data to estimate both our simple model and a richer DSGE model with the same information structure. Our estimates suggest that noise shocks play an important role in short-run consumption fluctuations.

Keywords: Exportaciones; Aggregate shocks; business cycles; vector autoregression; invertibility (search for similar items in EconPapers)
JEL-codes: C32 D83 E32 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2012-09
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 (1)

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Related works:
Journal Article: News, Noise, and Fluctuations: An Empirical Exploration (2013)
Working Paper: News, Noise, and Fluctuations: An Empirical Exploration (2011)
Working Paper: News, Noise, and Fluctuations: An Empirical Exploration (2009)
Working Paper: News, Noise and Fluctuations: An Empirical Exploration (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:adv:wpaper:201209

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