Stock Prices, News, and Economic Fluctuations: Comment

44 Pages Posted: 6 Apr 2013

See all articles by André Kurmann

André Kurmann

Drexel University - LeBow College of Business

Elmar Mertens

Deutsche Bundesbank

Date Written: January 1, 2013

Abstract

Beaudry and Portier (American Economoc Review, 2006) propose an identification scheme to study the effects of news shocks about future productivity in Vector Error Correction Models (VECM). This comment shows that their methodology does not have a unique solution, when applied to their VECMs with more than two variables. The problem arises from the interplay of cointegration assumptions and long-run restrictions imposed by Beaudry and Portier (2006).

Keywords: Vector Error Correction Model, long-run restrictions, news shocks

JEL Classification: G12, E32, E44

Suggested Citation

Kurmann, André and Mertens, Elmar, Stock Prices, News, and Economic Fluctuations: Comment (January 1, 2013). FEDS Working Paper No. 2013-08, Available at SSRN: https://ssrn.com/abstract=2244506 or http://dx.doi.org/10.2139/ssrn.2244506

André Kurmann

Drexel University - LeBow College of Business ( email )

School of Economics
3220 Market Street
Philadelphia, PA 19104
United States

Elmar Mertens (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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