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No News in Business Cycles

Mario Forni (), Luca Gambetti () and Luca Sala ()

No 383, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

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.

New Economics Papers: this item is included in nep-bec, nep-cba and nep-mac
Date: 2011
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Related works:
Journal Article: No News in Business Cycles (2014) Downloads
Working Paper: No News in Business Cycles (2013) Downloads
Working Paper: No News in Business Cycles (2011) Downloads
Working Paper: No News in Business Cycles (2011) Downloads
Working Paper: No News in Business Cycles (2011) Downloads
Working Paper: No news in business cycles (2011) Downloads
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