News, Noise, and Fluctuations: An Empirical Exploration

News, Noise, and Fluctuations: An Empirical Exploration

We explore empirically models of aggregate fluctuations in which consumers form anticipations about the future based on noisy sources of information and these anticipations affect output in the short run. Our objective is to separate fluctuations due to changes in fundamentals (news) from those due...

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Veröffentlicht in:The American economic review 2013-12, Vol.103 (7), p.3045-3070
Hauptverfasser: Blanchard, Olivier J., L'Huillier, Jean-Paul, Lorenzoni, Guido
Format: Artikel
Sprache:eng
Schlagworte:
Business cycles
Consumer behavior
Consumer economics
Consumer spending
Consumption
Econometrics
Economic expectations
Economic fluctuations
Economic modeling
Economic models
Empirical research
Error
Maximum likelihood method
News
Noise
Parametric models
Productivity
Shorter Papers
Signal noise
Statistical discrepancies
Studies
U.S.A
Vector-autoregressive models
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Beschreibung
Zusammenfassung:We explore empirically models of aggregate fluctuations in which consumers form anticipations about the future based on noisy sources of information and these anticipations affect output in the short run. Our objective is to separate fluctuations due to changes in fundamentals (news) from those due to temporary errors in agents' estimates (noise). We show that structural VARs cannot be used to identify news and noise shocks, but identification is possible via a method of moments or maximum likelihood. Next, we estimate our model on US data. Our results suggest that noise shocks explain a sizable fraction of short-run consumption fluctuations. (JEL D84, E13, E21, E32)
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.103.7.3045