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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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File URL: http://www.nber.org/papers/w15312.pdf
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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
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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
Note: AP EFG ME PR
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  8. Jean-Paul L'Huillier & Guido Lorenzoni & Olivier Blanchard, 2011. "News, Noise, and Fluctuations: An Empirical Exploration," 2011 Meeting Papers 969, Society for Economic Dynamics.
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  17. Harald Uhlig, 2004. "Do Technology Shocks Lead to a Fall in Total Hours Worked?," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 361-371, 04/05.
  18. Robert B. Barsky & Eric R. Sims, 2012. "Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence," American Economic Review, American Economic Association, vol. 102(4), pages 1343-77, June.
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  23. Neville Francis & Michael T. Owyang & Jennifer E. Roush & Riccardo DiCecio, 2010. "A flexible finite-horizon alternative to long-run restrictions with an application to technology shock," Working Papers 2005-024, Federal Reserve Bank of St. Louis.
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