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News and Financial Intermediation in Aggregate Fluctuations

Author

Listed:
  • Christoph Görtz

    (University of Birmingham)

  • John D. Tsoukalas

    (University of Glasgow)

Abstract

An important disconnect in the news view of fluctuations is the lack of consistent evidence suggestive of significant macroeconomic effects of news shocks. Findings from estimated DSGE models that in theory allow news shocks to matter quantitatively suggest that they do not. This disconnect can be resolved once we augment a DSGE model with a financial channel that provides amplification to news shocks. Our results suggest that news shocks to the future growth prospects of the economy are significant drivers of U.S. fluctuations, explaining as much as 50% and 37% of the variance in hours worked and output, respectively, in cyclical frequencies.

Suggested Citation

  • Christoph Görtz & John D. Tsoukalas, 2017. "News and Financial Intermediation in Aggregate Fluctuations," The Review of Economics and Statistics, MIT Press, vol. 99(3), pages 514-530, July.
  • Handle: RePEc:tpr:restat:v:99:y:2017:i:3:p:514-530
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    Citations

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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. Stéphane Auray & Paul Gomme & Shen Guo, 2013. "Nominal Rigidities, Monetary Policy and Pigou Cycles," Economic Journal, Royal Economic Society, vol. 0, pages 455-473, May.
    3. repec:eee:dyncon:v:78:y:2017:i:c:p:164-189 is not listed on IDEAS
    4. Luca Gambetti & Dimitris Korobilis & John D. Tsoukalas & Francesco Zanetti, 2017. "The Effect of News Shocks and Monetary Policy," BCAM Working Papers 1705, Birkbeck Centre for Applied Macroeconomics.
    5. Konstantinos Theodoridis & Francesco Zanetti, 2016. "News shocks and labour market dynamics in matching models," Canadian Journal of Economics, Canadian Economics Association, vol. 49(3), pages 906-930, August.
    6. Gelain, Paolo & Ilbas, Pelin, 2017. "Monetary and macroprudential policies in an estimated model with financial intermediation," Journal of Economic Dynamics and Control, Elsevier, vol. 78(C), pages 164-189.
    7. Theodoridis, Konstantinos & Zanetti, Francesco, 2014. "News and labour market dynamics in the data and in matching models," Bank of England working papers 488, Bank of England.
    8. Tadeusz Klecha & Daniel Kosiorowski & Dominik Mielczarek & Jerzy P. Rydlewski, 2018. "New Proposals of a Stress Measure in a Capital and its Robust Estimator," Papers 1802.03756, arXiv.org.
    9. Alok Johri & Terry Yip, 2017. "Financial Shocks,Supply-chain Relationships and the Great Trade Collapse," Department of Economics Working Papers 2017-11, McMaster University.
    10. Christopher M. Gunn, 2014. "Overaccumulation, Interest, and Prices," Carleton Economic Papers 14-07, Carleton University, Department of Economics.

    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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