No News in Business Cycles

Mario Forni, Luca Sala () and Luca Gambetti

No 535, Working Papers from Barcelona School of Economics

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; fundamentalness; news shocks; invertibility (search for similar items in EconPapers)
JEL-codes: C32 E32 E62 (search for similar items in EconPapers)
Date: 2015-09
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Citations: View citations in EconPapers (12)

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Related works:
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)
Working Paper: No news in business cycles (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:535

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