Can News Be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach

Ippei Fujiwara, Yasuo Hirose and Mototsugu Shintani

No 08-E-16, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: We examine whether the news shocks, as explored in Beaudry and Portier (2004), can be a major source of aggregate fluctuations. For this purpose, we extend a dynamic stochastic general equilibrium model, a la Christiano, Eichenbaum, and Evans (2005), by allowing news shocks on the total factor productivity and estimate the model using Bayesian methods. Estimation results on the Japanese and U.S. economies show that (1) the news shocks play an important role in business cycles; (2) a news shock with a longer forecast horizon has larger effects on nominal variables; and (3) the overall effect of the total factor productivity on hours worked becomes ambiguous in the presence of news shocks.

Keywords: Demand for Money; Aggregation; Heterogeneity (search for similar items in EconPapers)
JEL-codes: C43 E41 (search for similar items in EconPapers)
Date: 2008-07
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Related works:
Journal Article: Can News Be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach (2011)
Journal Article: Can News Be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach (2011)
Working Paper: Can News Be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach (2009)
Working Paper: Can News Be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach (2008)
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