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Identifying News Shocks with Forecast Data

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  • Yasuo Hirose

    ()

  • Takushi Kurozumi

    ()

Abstract

Recent studies attempt to quantify the empirical importance of news shocks (ie., anticipated future schocks) in business cycle fluctuations. This paper identifies news schocks in a dynamic stochastic general equilibrium model estimated with not only actual data but also forecast data. The estimation results show new empirical evidence that antecipated future technology shocks are the most important driving force of U.S. business cycles. The use of the forecast data makes the anticipated shocks play a much more important role in fitting model-implied expectations to this data, since such shocks have persistent effects on the expectaions and thereby help to replicate the observed persistence of the forecasts.

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File URL: http://cama.crawford.anu.edu.au/pdf/working-papers/2012/012012.pdf
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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2012-01.

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Length: 30 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:een:camaaa:2012-01

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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.
  2. Sohei Kaihatsu & Takushi Kurozumi, 2014. "Sources of Business Fluctuations: Financial or Technology Shocks?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 224-242, April.
  3. Jinill Kim & Seth Pruitt, 2013. "Estimating Monetary Policy Rules When Nominal Interest Rates Are Stuck at Zero," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2013-53, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Fabio Milani & Ashish Rajrhandari, 2012. "Observed Expectations, News Shocks, and the Business Cycle," Working Papers, University of California-Irvine, Department of Economics 121305, University of California-Irvine, Department of Economics.

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