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The Macroeconomic Effects of False Announcements

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Author Info
Oh, Seonghwan
Waldman, Michael

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Abstract

Suppose 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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Publisher Info
Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 105 (1990)
Issue (Month): 4 (November)
Pages: 1017-34
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Handle: RePEc:tpr:qjecon:v:105:y:1990:i:4:p:1017-34

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Web page: http://mitpress.mit.edu/journals/

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  1. Seonghwan Oh & Michael Waldman, 2005. "The Index of Leading Economic Indicators as a Source of Expectational Shocks," Eastern Economic Journal, Eastern Economic Association, vol. 31(1), pages 75-95, Winter. [Downloadable!]
  2. Joan Esteban & Facundo Albornoz & Paolo Vanin, 2009. "Government Information Transparency," UFAE and IAE Working Papers 774.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  3. Keen Meng Choy & Kenneth Leong & Anthony S. Tay, 2003. "Non-Fundamental Expectations and Economic Fluctuations: Evidence from Professional Forecasts," Departmental Working Papers wp0306, National University of Singapore, Department of Economics. [Downloadable!]
    Other versions:
  4. Clements, Michael P. & Galvão, Ana Beatriz, 2009. "First Announcements and Real Economic Activity," The Warwick Economics Research Paper Series (TWERPS) 885, University of Warwick, Department of Economics. [Downloadable!]
  5. Fehr, Ernst & Tyran, Jean-Robert, 2000. "Does Money Illusion Matter? An Experimental Approach," IZA Discussion Papers 174, Institute for the Study of Labor (IZA). [Downloadable!]
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  6. Antulio N. Bomfim & Francis X. Diebold, 1996. "Bounded Rationality and Strategic Complementarity in a Macroeconomic Model: Policy Effects, Persistence and Multipliers," NBER Working Papers 5482, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Ernst Fehr & Jean-Robert Tyran, 2004. "Limited Rationality and Strategic Interaction - The Impact of the Strategic Environment on Nominal Inertia," Levine's Bibliography 122247000000000092, UCLA Department of Economics. [Downloadable!]
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  8. Dean Croushore, 2008. "Frontiers of real-time data analysis," Working Papers 08-4, Federal Reserve Bank of Philadelphia. [Downloadable!]
  9. Ernst Fehr & Jean-Robert Tyran, . "Does Money Illusion Matter? REVISED VERSION," IEW - Working Papers iewwp045, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  10. Antulio N. Bomfim, 1999. "Measurement error in general equilibrium: the aggregate effects of noisy economic indicators," Finance and Economics Discussion Series 1999-54, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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