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Sector Specific News Shocks in Aggregate and Sectoral Fluctuations

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  • Christoph Görtz
  • John D. Tsoukalas

Abstract

Using a two-sector estimated DSGE model with a financial channel we show the sector where TFP news arrives matters for its propagation and quantitative importance. Anticipated increases in TFP expected to arrive in the consumption sector are expansionary while those in the investment sector are broadly contractionary. Our results indicate a significant role of TFP news shocks as a predictive force behind fluctuations. Consumption sector TFP news shocks generate both aggregate and sectoral co-movement and account for approximately, 31%, 21%, 43%, 29% in the variance of output, investment, hours worked, and consumption respectively in business cycle frequencies. The financial channel provides amplification to TFP news. We discuss the relationship of our findings with VAR based estimates of TFP news shocks.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4269.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4269

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Keywords: news; business cycles; DSGE; Bayesian estimation;

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Cited by:
  1. Thuy Lan Nguyen & Wataru Miyamoto, 2014. "News shocks and Business cycles: Evidence from forecast data," 2014 Meeting Papers, Society for Economic Dynamics 259, Society for Economic Dynamics.

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