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

Ippei Fujiwara, Yasuo Hirose and Mototsugu Shintani

No 921, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

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 standard dynamic stochastic general equilibrium model of Christiano, Eichenbaum, and Evans (2005), and Smets and Wouters (2003, 2007) by allowing news shocks on the total factor productivity, and estimate the model using Bayesian methods. Estimation results on the U.S. and Japanese economies suggest that (1) news shocks play a relatively more important role in the U.S. than in Japan; (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: Bayesian estimation; business cycles; news (search for similar items in EconPapers)
JEL-codes: E30 E40 E50 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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http://www.accessecon.com/pubs/VUECON/vu09-w21.pdf First version, 2009 (application/pdf)

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 (2008)
Working Paper: Can News Be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:0921

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