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News Driven Business Cycles: Insights and Challenges

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  • Paul Beaudry

    (University of British Colombia)

  • Franck Portier

    (Toulouse School of Economics)

Abstract

There is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations. The news view of business cycles offers a formalization of this perspective. In this paper we discuss mechanisms by which changes in agents' information, due to the arrival of news, can cause business cycle fluctuations driven by expectational change, and we review the empirical evidence aimed at evaluating its relevance. In particular, we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations, while at the same time we emphasize the many challenges that must be addressed before a proper assessment of its role in business cycles can be established.

Suggested Citation

  • Paul Beaudry & Franck Portier, 2014. "News Driven Business Cycles: Insights and Challenges," 2014 Meeting Papers 289, Society for Economic Dynamics.
  • Handle: RePEc:red:sed014:289
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    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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