NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Keyoung Lee

Department of Economics
8283 Bunche Hall
UCLA
Los Angeles, CA 90095

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NBER Working Papers and Publications

November 2014Whither News Shocks?
with Robert B. Barsky, Susanto Basu: w20666
Does news about future productivity cause business-cycle fluctuations? What other effects might it have? We explore the answer to this question using semi-structural VARs, where “news” is defined as the innovation in the expectation of TFP at a fixed horizon in the future. We find that systems incorporating a number of forward-looking variables, including stock prices, consumption, consumer confidence and inflation, robustly predict three outcomes. First, following a news shock, TFP rises for several years. Second, inflation falls immediately and substantially, and stays low, often for 10 quarters or more. Third, there is a sharp increase in a forward-looking measure of consumer confidence. Consumption typically rises following good news, but investment, consumer durables purchases...

Published: Whither News Shocks?, Robert B. Barsky, Susanto Basu, Keyoung Lee. in NBER Macroeconomics Annual 2014, Volume 29, Parker and Woodford. 2015

July 2014Whither News Shocks?
with Robert B. Barsky, Susanto Basu
in NBER Macroeconomics Annual 2014, Volume 29, Jonathan A. Parker and Michael Woodford, editors
Does news about future productivity cause business-cycle fluctuations? What other effects might it have? We explore the answer to this question using semi-structural VARs, where "news" is defined as the innovation in the expectation of TFP at a fixed horizon in the future. We find that systems incorporating a number of forward-looking variables, including stock prices, consumption, consumer confidence and inflation, robustly predict three outcomes. First, following a news shock, TFP rises for several years. Second, inflation falls immediately and substantially, and stays low, often for 10 quarters or more. Third, there is a sharp increase in a forward-looking measure of consumer confidence. Consumption typically rises following good news, but investment, consumer durables purchases and hou...
 
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