TY  - JOUR
AU  - Barsky,Robert B.
AU  - Sims,Eric R.
TI  - News Shocks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15312
PY  - 2009
Y2  - September 2009
UR  - http://www.nber.org/papers/w15312
L1  - http://www.nber.org/papers/w15312.pdf
N1  - Author contact info:
Robert B. Barsky
Department of Economics
University of Michigan
Ann Arbor, MI  48109-1220
Tel: 734/764-9476
Fax: 734/764-2769
E-Mail: barsky@umich.edu

Eric R. Sims
Department of Economics
University of Notre Dame
723 Flanner Hall
South Bend, IN 46556
Tel: 574/631-6309
Fax: 574/631-4783
E-Mail: esims1@nd.edu
AB  - 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.
ER  -