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Mainly employment: survey-based news and the business cycle

Riccardo M. Masolo

No 958, Bank of England working papers from Bank of England

Abstract: Surprises in survey responses on perceived business conditions produce strong comovement in unemployment, consumption, investment, and output, and a muted response of inflation and measured total factor productivity (TFP). This suggests that news play an important role in explaining business cycle fluctuations, but also that attention should not be limited to TFP news. Employment news are the main driver of the overall index of reported business conditions. Vector autoregression impulse responses can be matched by a New Keynesian model in which individual risk, a positive supply of liquid funds, and complementarity between labour and capital inputs are modelled explicitly and the assumption of free entry of vacancies is done away with.

Keywords: News; unemployment; business cycles; search frictions; individual risk (search for similar items in EconPapers)
JEL-codes: C30 E31 E32 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2022-01-07
New Economics Papers: this item is included in nep-cwa, nep-dge and nep-mac
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