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News and Aggregate Demand Shocks


  • Guido Lorenzoni

    () (Department of Economics, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142-1347, and NBER, Cambridge, Massachusetts 02138)


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.

Suggested Citation

  • Guido Lorenzoni, 2011. "News and Aggregate Demand Shocks," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 537-557, September.
  • Handle: RePEc:anr:reveco:v:3:y:2011:p:537-557

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    References listed on IDEAS

    1. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 411-482, July.
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    Cited by:

    1. Paul Beaudry & Franck Portier, 2014. "News-Driven Business Cycles: Insights and Challenges," Journal of Economic Literature, American Economic Association, vol. 52(4), pages 993-1074, December.
    2. Olivier J. Blanchard & Jean-Paul L'Huillier & Guido Lorenzoni, 2013. "News, Noise, and Fluctuations: An Empirical Exploration," American Economic Review, American Economic Association, vol. 103(7), pages 3045-3070, December.
    3. Nam, Deokwoo & Wang, Jian, 2015. "The effects of surprise and anticipated technology changes on international relative prices and trade," Journal of International Economics, Elsevier, vol. 97(1), pages 162-177.
    4. Pavlov, Oscar, 2016. "Can firm entry explain news-driven fluctuations?," Economic Modelling, Elsevier, vol. 52(PB), pages 427-434.
    5. Daniele Siena, 2017. "What's News in International Business Cycles," 2017 Meeting Papers 1206, Society for Economic Dynamics.
    6. Can Tian, 2014. "Forecast Shocks in Production Networks," 2014 Meeting Papers 87, Society for Economic Dynamics.
    7. Michael Rousakis, 2013. "Expectations and Fluctuations: The Role of Monetary Policy," 2013 Meeting Papers 681, Society for Economic Dynamics.
    8. Ryan Chahrour & Kyle Jurado, 2016. "News or Noise? The Missing Link," Boston College Working Papers in Economics 917, Boston College Department of Economics, revised 02 Nov 2017.
    9. Favilukis, Jack & Lin, Xiaoji, 2013. "Long run productivity risk and aggregate investment," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 737-751.
    10. Dupor, Bill & Mehkari, M. Saif, 2014. "The analytics of technology news shocks," Journal of Economic Theory, Elsevier, vol. 153(C), pages 392-427.

    More about this item


    business cycles; expectations;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General


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