From Buzz to Bust: How Fake News Shapes the Business Cycle

Tiziana Assenza (), Fabrice Collard (), Patrick Fève () and Stefanie Huber
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Tiziana Assenza: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IAST - Institute for Advanced Study in Toulouse
Fabrice Collard: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEPR - Center for Economic Policy Research
Patrick Fève: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Stefanie Huber: Universität Bonn = University of Bonn

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Abstract: The proliferation of fake news poses significant challenges for policymakers and raises concerns about its potential impact on economic stability. This paper explores this question, focusing on the macroeconomic effects of technology related fake news in the US for the period 2007–2022. Utilizing a novel dataset of fact-checked statements from PolitiFact, we construct a binary indicator to build a proxy for the exogenous variation in fake news issuance. Adopting a proxy-VAR approach, we show that technology fake news increases macroeconomic uncertainty, exacerbates unemployment, and depresses industrial production. Similar effects are observed for fake news related to the supply side, such as tax rates or the price of gas. On the contrary, fake news related to government finance, market regulation, or the labor market does not impact economic stability. Furthermore, fake news that conveys negative information about technological developments exhibits stronger depressive impacts than positive ones.

Keywords: Fake news; Business cycle; Proxy-VAR (search for similar items in EconPapers)
Date: 2024-03
Note: View the original document on HAL open archive server: https://hal.science/hal-04958375v1
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