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Amplification effects of news shocks through uncertainty

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  • Danilo Cascaldi-Garcia

Abstract

In this paper I investigate the empirical relationship between agents' responses to future technological improvements and the level of uncertainty in the economy. I show that the economic responses to news shocks change substantially over time, and that this dynamic couples with periods of high and low uncertainty. Periods of high uncertainty are characterized by higher positive economic effects of news shocks on output, consumption, investment and real personal income. These results indicate that the continuous updating of agents' expectations about the current and future economic situation operates as a transmission channel for news shocks, amplifying its positive outcomes.

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  • Danilo Cascaldi-Garcia, 2017. "Amplification effects of news shocks through uncertainty," 2017 Papers pca1251, Job Market Papers.
    • Handle: RePEc:jmp:jm2017:pca1251
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    Cited by:

    1. Di Casola, Paola & Sichlimiris, Spyridon, 2018. "Towards Technology-News-Driven Business Cycles," Working Paper Series 360, Sveriges Riksbank (Central Bank of Sweden).

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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