News Shocks

Robert Barsky and Eric Sims ()

No 15312, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We implement a new approach for the identification of "news shocks" about future technology. In a VAR featuring a measure of aggregate technology and several forward-looking variables, we identify the news shock as the shock orthogonal to technology innovations that best explains future variation in technology. In the data, news shocks account for the bulk of low frequency variation in technology. News shocks are positively correlated with consumption, stock price, and consumer confidence innovations, and negatively correlated with inflation innovations. The disinflationary nature of news shocks is consistent with the implications of sensibly modified versions of a New Keynesian model.

JEL-codes: E0 E00 E1 E10 E2 E20 E3 E30 E31 E32 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-bec, nep-cba and nep-mac
Note: AP EFG ME PR
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Citations: View citations in EconPapers (26)

Published as "News Shocks and Business Cycles" with Bob Barsky, April 2011, pdf, Journal of Monetary Economics 58(3), 273-289.

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