The Macroeconomic Effects of False Announcements
AbstractSuppose that the government was to announce that the economy will be booming in six months and that this announcement is based on false data. What effect would such an announcement have on future aggregate activity? This paper employs revisions of the series of leading economic indicators to test the hypothesis that such an announcement would have a positive effect on future activity. The authors find that the evidence is generally consistent with the hypothesis and that for the time period 1976-88 the expectational shocks measured by these revisions explain over 20 percent of the fluctuation in the quarterly growth rate of industrial production. Copyright 1990, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal Quarterly Journal of Economics.
Volume (Year): 105 (1990)
Issue (Month): 4 (November)
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