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Testing the technology interpretation of news shocks

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  • Bernd Lucke

Abstract

This article presents further evidence on the hypothesis of news driven business cycles. I use a structural Vector Error Correction Model (VECM) approach to identify news shocks as in Beaudry and Lucke (BL, 2010). I document three facts: first, news shocks identified by BL are Granger causal for US patent data; second, BL's analysis applied to German macro data reveals very similar patterns: activity is largely driven by news, and news shocks explain a sizable and increasing share of Total Factor Productivity (TFP) variance at long horizons; and third, German news shocks are Granger causal for German patent data and the pattern is, again, very similar to the US. Since patent data in the US and Germany are almost uncorrelated, the similarity is striking and strongly suggests a technology interpretation of news shocks.

Suggested Citation

  • Bernd Lucke, 2013. "Testing the technology interpretation of news shocks," Applied Economics, Taylor & Francis Journals, vol. 45(1), pages 1-13, January.
  • Handle: RePEc:taf:applec:45:y:2013:i:1:p:1-13
    DOI: 10.1080/00036846.2011.566209
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    File URL: http://hdl.handle.net/10.1080/00036846.2011.566209
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    References listed on IDEAS

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    1. Lucke, Bernd & Haertel, Thomas, 2008. "Do News Shocks Drive Business Cycles? Evidence from German Data," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-21.
    2. Paul Beaudry & Bernd Lucke, 2010. "Letting Different Views about Business Cycles Compete," NBER Chapters,in: NBER Macroeconomics Annual 2009, Volume 24, pages 413-455 National Bureau of Economic Research, Inc.
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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. Gangopadhyay, Kausik & Nishimura, Atsushi & Pal, Rupayan, 2016. "Can the information technology revolution explain the incidence of co-movement of skill premium and stock prices?," Economic Modelling, Elsevier, vol. 53(C), pages 107-120.

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