News and financial intermediation in aggregate fluctuations

Christoph Gortz, John Tsoukalas

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)
208 Downloads (Pure)

Abstract

An important disconnect in the news view of fluctuations is the lack of consistent evidence suggestive of significant macroeconomic effects of news shocks. Findings from estimated DSGE models that, in theory, allow news shocks to matter quantitatively, suggest they do not. This disconnect can be resolved once we augment a DSGE model with a financial channel that provides amplification to news shocks. Our results suggest news shocks to the future growth prospects of the economy to be significant drivers of U.S. fluctuations, explaining as much as 50% and 37% of the variance in hours worked and output respectively, in cyclical frequencies.
Original languageEnglish
Pages (from-to)514-530
Number of pages17
JournalThe Review of Economics and Statistics
Volume99
Issue number3
DOIs
Publication statusPublished - 17 Jul 2017

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