No News in Business Cycles

24 Pages Posted: 10 Dec 2014

See all articles by Mario Forni

Mario Forni

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; Centre for Economic Policy Research (CEPR)

Luca Gambetti

Universitat Autonoma de Barcelona

Luca Sala

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER)

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Date Written: December 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.

Suggested Citation

Forni, Mario and Gambetti, Luca and Sala, Luca, No News in Business Cycles (December 2014). The Economic Journal, Vol. 124, Issue 581, pp. 1168-1191, 2014. Available at SSRN: https://ssrn.com/abstract=2536175 or http://dx.doi.org/10.1111/ecoj.12111

Mario Forni (Contact Author)

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )

Viale Berengario 51
41100 Modena, Modena 41100
Italy
+39 059 205 6852 (Phone)
+39 059 205 6947 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Luca Gambetti

Universitat Autonoma de Barcelona ( email )

Plaça Cívica
Cerdañola del Valles
Barcelona, Barcelona 08193
Spain

Luca Sala

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER) ( email )

Via Roentgen 1
Milan, 20136
Italy
+39 02 5836 3326 (Phone)

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