Investment‐Specific News Shocks and U.S. Business Cycles

Nadav Ben Zeev · Hashmat Khan

75 citations0/0 files storedJournal of money credit and banking

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Monetary Policy and Economic Impact Economic Growth and Productivity Economic theories and models

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.

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References

2009The Impact of Uncertainty Shocks 2012Credit Spreads and Business Cycle Fluctuations 1986Investment, Capacity Utilization and the Real Business Cycle 2007The Impact of Uncertainty Shocks 2010The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks 1996Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations 2011Identifying Government Spending Shocks: It's all in the Timing*2004A New Measure of Monetary Shocks: Derivation and Implications

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