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On the (de)stabilizing effects of news shocks

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  • Winkler, Roland C.
  • Wohltmann, Hans-Werner

Abstract

This paper shows that news shocks amplify macroeconomic volatility in any purely forward-looking model, whereas results are ambiguous when including a backward-looking component. We also investigate numerically the volatility effects of news shocks within the Smets and Wouters (2003) model.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 114 (2012)
Issue (Month): 3 ()
Pages: 256-258

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Handle: RePEc:eee:ecolet:v:114:y:2012:i:3:p:256-258

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Anticipated shocks; Business cycles; Volatility;

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References

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  1. Michael Woodford, 2009. "Convergence in Macroeconomics: Elements of the New Synthesis," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 267-79, January.
  2. Paul Beaudry & Bernd Lucke, 2009. "Letting Different Views about Business Cycles Compete," NBER Working Papers 14950, National Bureau of Economic Research, Inc.
  3. Paul Beaudry & Franck Portier, 2004. "Stock Prices, News and Economic Fluctuations," NBER Working Papers 10548, National Bureau of Economic Research, Inc.
  4. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research 35, National Bank of Belgium.
  5. Stephanie Schmitt-Grohe & Martin Uribe, 2008. "What's News in Business Cycles," NBER Working Papers 14215, National Bureau of Economic Research, Inc.
  6. Fève, Patrick & Matheron, Julien & Sahuc, Jean-Guillaume, 2009. "On the dynamic implications of news shocks," Economics Letters, Elsevier, vol. 102(2), pages 96-98, February.
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Cited by:
  1. Sacht, Stephen, 2014. "Optimal monetary policy responses and welfare analysis within the highfrequency New-Keynesian framework," Economics Working Papers 2014-03, Christian-Albrechts-University of Kiel, Department of Economics.
  2. Franck Portier, 2014. "News Driven Business Cycles: Insights and Challenges," 2014 Meeting Papers 289, Society for Economic Dynamics.
  3. Sacht, Stephen, 2014. "Analysis of various shocks within the high-frequency versions of the baseline New-Keynesian model," Economics Working Papers 2014-02, Christian-Albrechts-University of Kiel, Department of Economics.
  4. Offick, Sven & Wohltmann, Hans-Werner, 2013. "News shocks, nonfundamentalness and volatility," Economics Letters, Elsevier, vol. 119(1), pages 17-19.

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