No News in Business Cycles

Mario Forni, Luca Gambetti and Luca Sala ()

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

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 fluctuations are 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: 30
Date: 2011-02-21
New Economics Papers: this item is included in nep-bec, nep-cba, nep-ecm and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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http://pareto.uab.es/wp/2011/86211.pdf (application/pdf)

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:aub:autbar:862.11

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