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News Shocks

  • Robert B. Barsky
  • Eric R. Sims

We implement a new approach for the identification of "news shocks" about future technology. In a VAR featuring a measure of aggregate technology and several forward-looking variables, we identify the news shock as the shock orthogonal to technology innovations that best explains future variation in technology. In the data, news shocks account for the bulk of low frequency variation in technology. News shocks are positively correlated with consumption, stock price, and consumer confidence innovations, and negatively correlated with inflation innovations. The disinflationary nature of news shocks is consistent with the implications of sensibly modified versions of a New Keynesian model.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15312.

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Date of creation: Sep 2009
Date of revision:
Publication status: published as "News Shocks and Business Cycles" with Bob Barsky, April 2011, pdf, Journal of Monetary Economics 58(3), 273-289.
Handle: RePEc:nbr:nberwo:15312
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  19. Faust, Jon, 1998. "The robustness of identified VAR conclusions about money," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 49(1), pages 207-244, December.
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