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Sector Specific News Shocks in Aggregate and Sectoral Fluctuations

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  • Christoph Görtz
  • John D. Tsoukalas

Abstract

Using a two-sector estimated DSGE model with a financial channel we show the sector where TFP news arrives matters for its propagation and quantitative importance. Anticipated increases in TFP expected to arrive in the consumption sector are expansionary while those in the investment sector are broadly contractionary. Our results indicate a significant role of TFP news shocks as a predictive force behind fluctuations. Consumption sector TFP news shocks generate both aggregate and sectoral co-movement and account for approximately, 31%, 21%, 43%, 29% in the variance of output, investment, hours worked, and consumption respectively in business cycle frequencies. The financial channel provides amplification to TFP news. We discuss the relationship of our findings with VAR based estimates of TFP news shocks.

Suggested Citation

  • Christoph Görtz & John D. Tsoukalas, 2013. "Sector Specific News Shocks in Aggregate and Sectoral Fluctuations," CESifo Working Paper Series 4269, CESifo.
    • Handle: RePEc:ces:ceswps:_4269
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    1. Thuy Lan Nguyen & Wataru Miyamoto, 2014. "News shocks and Business cycles: Evidence from forecast data," 2014 Meeting Papers 259, Society for Economic Dynamics.
    2. Alban Moura, 2018. "Investment Shocks, Sticky Prices, and the Endogenous Relative Price of Investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 27, pages 48-63, January.
    3. Miyamoto, Wataru & Nguyen, Thuy Lan, 2020. "The expectational effects of news in business cycles: Evidence from forecast data," Journal of Monetary Economics, Elsevier, vol. 116(C), pages 184-200.
    4. Gunn, Christopher M. & Johri, Alok, 2018. "Financial News, Banks, And Business Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 22(2), pages 173-198, March.

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    More about this item

    Keywords

    news; business cycles; DSGE; Bayesian estimation;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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