When Creativity Strikes: News Shocks and Business Cycle Fluctuations
Silvia Miranda-Agrippino (),
Sinem Hacioglu Hoke () and
No 1823, Discussion Papers from Centre for Macroeconomics (CFM)
We use monthly US utility patent applications to construct an external instrument for identification of technology news shocks in a rich-information VAR. Technology diffuses slowly, and affects total factor productivity in an S-shaped pattern. Responsible for about a tenth of economic fluctuations at business cycle frequencies, the shock elicits a slow, but large and positive response of quantities, and a sluggish contraction in prices, followed by an endogenous easing in the monetary stance. The ensuing economic expansion substantially anticipates any material increase in TFP. Technology news are strongly priced-in in the stock market on impact, but measures of consumers’ expectations take sensibly longer to adjust, consistent with a New-Keynesian framework with nominal rigidities, and featuring informationally constrained agents.
Keywords: Technology news schocks; Business cycle; Identification with external instruments; Patent applications (search for similar items in EconPapers)
JEL-codes: E22 E23 E32 O33 O34 (search for similar items in EconPapers)
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Working Paper: When creativity strikes: news shocks and business cycle fluctuations (2019)
Working Paper: When creativity strikes: news shocks and business cycle fluctuations (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:1823
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