News and Aggregate Demand Shocks
In this review, I look at the recent literature on news as a source of economic fluctuations. The main question in this literature is: how does the aggregate economy respond to a shock that raises consumers' and firms' expectations about future productivity growth? I discuss how different papers have addressed this question, emphasizing the mechanisms at work under different specifications of preferences and technology, under different assumptions about nominal and real rigidities, and under different assumptions about the agents' information structure. I also briefly discuss some challenges faced by the empirical literature on the topic.
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Volume (Year): 3 (2011)
Issue (Month): 1 (September)
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