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Mainly employment: survey-based news and the business cycle

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  • Masolo, Riccardo M

    (Bank of England)

Abstract

Surprises in survey responses on perceived business conditions produce strong comovement in unemployment, consumption, investment, and output, and a muted response of inflation and measured total factor productivity (TFP). This suggests that news play an important role in explaining business cycle fluctuations, but also that attention should not be limited to TFP news. Employment news are the main driver of the overall index of reported business conditions. Vector autoregression impulse responses can be matched by a New Keynesian model in which individual risk, a positive supply of liquid funds, and complementarity between labour and capital inputs are modelled explicitly and the assumption of free entry of vacancies is done away with.

Suggested Citation

  • Masolo, Riccardo M, 2022. "Mainly employment: survey-based news and the business cycle," Bank of England working papers 958, Bank of England.
    • Handle: RePEc:boe:boeewp:0958
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    More about this item

    Keywords

    News; unemployment; business cycles; search frictions; individual risk;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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