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From Buzz to Bust: How Fake News Shapes the Business Cycle

Author

Listed:
  • Assenza, Tiziana
  • Collard, Fabrice
  • Feve, Patrick
  • Huber, Stefanie

Abstract

This paper explores the macroeconomic impact of technology-related fake news, a critical issue largely overlooked in economic research. By constructing a novel dataset of fact-checked technology statements from PolitiFact, we develop a proxy for a technology-related fake news shock and use it to recover their dynamic causal effects on business cycle dynamics. The results reveal that fake news heightens macroeconomic uncertainty, increases unemployment, and depresses production, contributing substantially to business cycle volatility. Notably, fake news conveying negative information exerts a disproportionately larger economic impact, offering important insights into how misinformation distorts economic outcomes and amplifies uncertainty.

Suggested Citation

  • Assenza, Tiziana & Collard, Fabrice & Feve, Patrick & Huber, Stefanie, 2024. "From Buzz to Bust: How Fake News Shapes the Business Cycle," CEPR Discussion Papers 18912, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18912
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    File URL: https://cepr.org/publications/DP18912
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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