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News and Aggregate Demand Shocks

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Author Info

  • 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.

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File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-economics-061109-080427
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Bibliographic Info

Article provided by Annual Reviews in its journal Annual Review of Economics.

Volume (Year): 3 (2011)
Issue (Month): 1 (09)
Pages: 537-557

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Handle: RePEc:anr:reveco:v:3:y:2011:p:537-557

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Related research

Keywords: business cycles; expectations;

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Cited by:
  1. Paul Beaudry & Franck Portier, 2013. "News Driven Business Cycles: Insights and Challenges," NBER Working Papers 19411, National Bureau of Economic Research, Inc.
  2. Michael Rousakis, 2013. "Expectations and Fluctuations: The Role of Monetary Policy," 2013 Meeting Papers 681, Society for Economic Dynamics.
  3. Favilukis, Jack & Lin, Xiaoji, 2013. "Long run productivity risk and aggregate investment," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 737-751.

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