American Economic Journal: Macroeconomics
no. 4, October 2017
We investigate the role of "noise" shocks as a source of business cycle fluctuations. To do so we set up a simple model of imperfect information and derive restrictions for identifying the noise shock in a VAR model. The novelty of our approach is that identification is reached by means of dynamic rotations of the reduced-form residuals. We find that noise shocks generate hump-shaped responses of GDP, consumption and investment, and account for a sizable fraction of their prediction error variance at business cycle horizons.
Forni, Mario, Luca Gambetti, Marco Lippi, and Luca Sala.
"Noisy News in Business Cycles."
American Economic Journal: Macroeconomics,
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
General Aggregative Models: Keynes; Keynesian; Post-Keynesian
Business Fluctuations; Cycles
Interest Rates: Determination, Term Structure, and Effects