Work

News and Financial Intermediation in Aggregate Fluctuations

Year: 2016

Type: article

Abstract: An important disconnect in the news view of fluctuations is the lack of consistent evidence suggestive of significant macroeconomic effects of news shocks. Findings from estimated DSGE models that in theory allow news shocks to matter quantitatively suggest that they do not. This disconnect can be resolved once we augment a DSGE model with a financial channel that provides amplification to news shocks. Our results suggest that news shocks to the future growth prospects of the economy are significant drivers of U.S. fluctuations, explaining as much as 50% and 37% of the variance in hours worked and output, respectively, in cyclical frequencies.

Source: The Review of Economics and Statistics

DOI: 10.1162/rest_a_00612

Authors: Christoph Görtz, John D. Tsoukalas

Institutions: University of Birmingham, University of Glasgow

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: bronze

Funder: Leverhulme Trust