IDEAS home Printed from https://ideas.repec.org/p/red/sed016/582.html
   My bibliography  Save this paper

Information-Driven Business Cycles: How Important are Noise Shocks?

Author

Listed:
  • Robert Ulbricht

    (Toulouse School of Economics)

  • Ryan Chahrour

    (Boston College)

Abstract

We bound the potential business cycle contribution of non-fundamental shocks to beliefs using a partial identification approach that is minimally restrictive. Firms face exogenous and endogenous fluctuations in their ideal actions, but are imperfectly informed about them. No structural restrictions are imposed on the origin or nature of the economy's fundamental shocks, the information structure of agents, or the process driving aggregate demand. Using data on the price level and output, we show that such non-fundamental shocks can contribute up to, but not more than, 28 percent of aggregate output fluctuations at short horizons and up to 45 percent of fluctuations unconditionally. Imposing additional economic restrictions and/or adding additional data tightens the bounds substantially, but without eliminating the potential for such shocks to play an important role in driving aggregate fluctuations.

Suggested Citation

  • Robert Ulbricht & Ryan Chahrour, 2016. "Information-Driven Business Cycles: How Important are Noise Shocks?," 2016 Meeting Papers 582, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:582
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2016/paper_582.pdf
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed016:582. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.