Working Paper: NBER ID: w15312
Authors: Robert B. Barsky; Eric R. Sims
Abstract: We implement a new approach for the identification of "news shocks" about future technology. In a VAR featuring a measure of aggregate technology and several forward-looking variables, we identify the news shock as the shock orthogonal to technology innovations that best explains future variation in technology. In the data, news shocks account for the bulk of low frequency variation in technology. News shocks are positively correlated with consumption, stock price, and consumer confidence innovations, and negatively correlated with inflation innovations. The disinflationary nature of news shocks is consistent with the implications of sensibly modified versions of a New Keynesian model.
Keywords: No keywords provided
JEL Codes: E0; E00; E1; E10; E2; E20; E3; E30; E31; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| news shocks (G14) | low-frequency movements in productivity (O49) |
| news shocks (G14) | innovations in consumption (D16) |
| news shocks (G14) | stock prices (G12) |
| news shocks (G14) | consumer confidence (D12) |
| news shocks (G14) | inflation innovations (E31) |
| news shocks (G14) | forecast error variance of consumer confidence (C53) |
| news shocks (G14) | forecast error variance of inflation (E31) |
| favorable news shocks (G14) | consumption (E21) |
| favorable news shocks (G14) | stock prices (G12) |
| favorable news shocks (G14) | inflation (E31) |
| news shocks (G14) | productivity movements (O49) |