On the (de)stabilizing effects of news shocks
AbstractThis paper analyzes the impacts of news shocks on macroeconomic volatility. Whereas anticipation amplifies volatility in any purely forward-looking model, such as the baseline New Keynesian model, the results are ambiguous when including a backward-looking component. In addition to these theoretical findings, we use the estimated model of Smets and Wouters (2003) to provide numerical evidence that news shocks increase the volatility of key macroeconomic variables in the euro area when compared to unanticipated shocks.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1542.
Length: 7 pages
Date of creation: Aug 2009
Date of revision:
Anticipated Shocks; Business Cycles; Volatility;
Other versions of this item:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-05 (All new papers)
- NEP-BEC-2009-09-05 (Business Economics)
- NEP-CBA-2009-09-05 (Central Banking)
- NEP-MAC-2009-09-05 (Macroeconomics)
- NEP-RMG-2009-09-05 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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