News, Noise, and Fluctuations: An Empirical Exploration

Olivier Blanchard, Jean-Paul L'Huillier and Guido Lorenzoni ()

American Economic Review, 2013, vol. 103, issue 7, 3045-70

Abstract: We explore empirically models of aggregate fluctuations in which consumers form anticipations about the future based on noisy sources of information and these anticipations affect output in the short run. Our objective is to separate fluctuations due to changes in fundamentals (news) from those due to temporary errors in agents' estimates (noise). We show that structural VARs cannot be used to identify news and noise shocks, but identification is possible via a method of moments or maximum likelihood. Next, we estimate our model on US data. Our results suggest that noise shocks explain a sizable fraction of short-run consumption fluctuations.

JEL-codes: D84 E13 E21 E32 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/aer.103.7.3045
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Citations: View citations in EconPapers (190)

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Related works:
Working Paper: News, Noise, and Fluctuations: An Empirical Exploration (2012)
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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