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News or Noise? The Missing Link

Ryan Chahrour and Kyle Jurado

American Economic Review, 2018, vol. 108, issue 7, 1702-36

Abstract: The literature on belief-driven business cycles treats news and noise as distinct representations of agents' beliefs. We prove they are empirically the same. Our result lets us isolate the importance of purely belief-driven fluctuations. Using three prominent estimated models, we show that existing research understates the importance of pure beliefs. We also explain how differences in both economic environment and information structure affect the estimated importance of pure beliefs.

JEL-codes: D83 D84 E12 E23 E32 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/aer.20170792
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Working Paper: News or Noise? The Missing Link (2017) Downloads
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