Abstract
We provide robust evidence that news shocks about future investment-specific technology (IST) constitute a significant force behind U.S. business cycles. Positive IST news shocks induce comovement, that is, raise output, consumption, investment, and hours. These shocks account for 70% of the business cycle variation in output, hours, and consumption, and 60% of the variation in investment, and have played an important role in 9 of the last 10 U.S. recessions. Our findings provide strong support for shifting focus to IST news shocks when investigating the role of news in driving U.S. business cycles.
| Original language | English |
|---|---|
| Pages (from-to) | 1443-1464 |
| Number of pages | 22 |
| Journal | Journal of Money, Credit and Banking |
| Volume | 47 |
| Issue number | 7 |
| DOIs | |
| State | Published - 1 Oct 2015 |
Keywords
- Business cycles
- Investment-specific technology
- News shocks
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics