An important disconnect in the news driven view of the business cycle formalized by Beaudry and Portier (2004), is the lack of agreement between different—VAR and DSGE—methodologies over the empirical plausibility of this view. We argue that this disconnect can be largely resolved once we...

We estimate a two-sector DSGE model with financial intermediaries—a-la Gertler and Karadi 2011) and Gertler and Kiyotaki (2010)—and quantify the importance of financial shocks in accounting for aggregate and sectoral fluctuations. Our results indicate a significant role of financial market...

We estimate a two-sector DSGEmodel with financial intermediaries—a-la Gertler and Karadi (2011) and Gertler and Kiyotaki (2010)—and quantify the importance of news shocks in accounting for aggregate and sectoral fluctuations. Our results indicate a significant role of financial market news...

We develop a two-sector DSGE model with financial intermediation to investigate the role of news as a driving force of the business cycle. We find that news about future capital quality is a significant source of aggregate fluctuations, accounting for around 37% in output variation in cyclical...

Using a two-sector estimated DSGE model with a financial channel we show the sector where TFP news arrives matters for its propagation and quantitative importance. Anticipated increases in TFP expected to arrive in the consumption sector are expansionary while those in the investment sector are...

We show that the standard Value Function Iteration (VFI) algorithm has difficulties approximating models with jump discontinuities in policy functions. We find that VFI fails to accurately identify the location and size of jump discontinuities while other methods - such as the Endogenous Grid...

We estimate a two-sector DSGE model with financial intermediaries—a-la Gertler and Karadi 2011) and Gertler and Kiyotaki (2010)—and quantify the importance of financial shocks in accounting for aggregate and sectoral fluctuations. Our results indicate a significant role of financial market...

We estimate a two-sector DSGE model with financial intermediaries—a-la Gertler and Karadi (2011) and Gertler and Kiyotaki (2010)—and quantify the importance of news shocks in accounting for aggregate and sectoral fluctuations. Our results indicate a significant role of financial market news...