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News and Aggregate Demand Shocks

Author

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  • Guido Lorenzoni

    (Department of Economics, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142-1347, and NBER, Cambridge, Massachusetts 02138)

Abstract

In this review, I look at the recent literature on news as a source of economic fluctuations. The main question in this literature is: how does the aggregate economy respond to a shock that raises consumers' and firms' expectations about future productivity growth? I discuss how different papers have addressed this question, emphasizing the mechanisms at work under different specifications of preferences and technology, under different assumptions about nominal and real rigidities, and under different assumptions about the agents' information structure. I also briefly discuss some challenges faced by the empirical literature on the topic.

Suggested Citation

  • Guido Lorenzoni, 2011. "News and Aggregate Demand Shocks," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 537-557, September.
    • Handle: RePEc:anr:reveco:v:3:y:2011:p:537-557
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-economics-061109-080427
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    More about this item

    Keywords

    business cycles; expectations;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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