Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174135
Authors: 
Le, Vo Phuong Mai
Meenagh, David
Minford, Patrick
Year of Publication: 
2017
Series/Report no.: 
Cardiff Economics Working Papers E2017/7
Abstract: 
A number of studies have found that news shocks account for a large part of the aggregate fluctuations of the main macroeconomic variables.We show that when taking rational expectations into consideration there is a limit on the size of the variance of the news shocks,which has not been considered in the literature.We offer an explanation to why this restriction should be imposed and show,with an empirical example from a recent paper,that if you do impose the rational expectations restriction the importance of the news is drastically reduced.
Subjects: 
News shocks
DSGE
Rational Expectations
JEL: 
E2
E3
Document Type: 
Working Paper

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