No news in business cycles
This paper uses a structural, large dimensional factor model to evaluate the role of `news' shocks (shocks with a delayed effect on productivity) in generating the business cycle. We find that (i) existing small-scale VECM models are affected by `non-fundamentalness' and therefore fail to recover the correct shock and impulse response functions; (ii) news shocks have a limited role in explaining the business cycle; (iii) their effects are in line with what predicted by standard neoclassical theory; (iv) the bulk of business cycle flucuations is explained by shocks unrelated to technology.
Year of publication: |
2011-06
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Authors: | Forni, Mario ; Gambetti, Luca ; Sala, Luca |
Institutions: | Dipartimento di Economia "Marco Biagi", Università degli Studi di Modena e Reggio Emilia |
Subject: | structural factor model | news shocks | invertibility | fundamentalness |
Saved in:
freely available
Extent: | application/pdf |
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Series: | |
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | pages 32 |
Classification: | C32 - Time-Series Models ; E32 - Business Fluctuations; Cycles ; E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation |
Source: |
Persistent link: https://www.econbiz.de/10009150877