A structural factor-augmented VAR model is used to evaluate the role of ‘news shocks’ in generating the business cycle. We find that existing small-scale VAR models are affected by ‘non-fundamentalness’ and therefore fail to recover the correct shock and impulse response functions; news shocks have a smaller role in explaining the business cycle than previously found in the literature; their effects are essentially in line with what predicted by standard theories and a substantial fraction of business cycle fluctuations are explained by shocks unrelated to technology.

No News in Business Cycles / Forni, Mario; Gambetti, Luca; Sala, Luca. - In: ECONOMIC JOURNAL. - ISSN 0013-0133. - STAMPA. - 124:(2014), pp. 1168-1191. [10.1111/ecoj.12111]

No News in Business Cycles

FORNI, Mario;
2014

Abstract

A structural factor-augmented VAR model is used to evaluate the role of ‘news shocks’ in generating the business cycle. We find that existing small-scale VAR models are affected by ‘non-fundamentalness’ and therefore fail to recover the correct shock and impulse response functions; news shocks have a smaller role in explaining the business cycle than previously found in the literature; their effects are essentially in line with what predicted by standard theories and a substantial fraction of business cycle fluctuations are explained by shocks unrelated to technology.
2014
124
1168
1191
No News in Business Cycles / Forni, Mario; Gambetti, Luca; Sala, Luca. - In: ECONOMIC JOURNAL. - ISSN 0013-0133. - STAMPA. - 124:(2014), pp. 1168-1191. [10.1111/ecoj.12111]
Forni, Mario; Gambetti, Luca; Sala, Luca
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/1062233
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