Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/217035
Authors: 
Görtz, Christoph
Gunn, Christopher
Lubik, Thomas A.
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8284
Abstract: 
We identify total factor productivity (TFP) news shocks using standard VAR methodology and document a new stylized fact: in response to news about future increases in TFP, inventories rise and comove positively with other major macroeconomic aggregates. We show that the standard theoretical model used to capture the effects of news shocks cannot replicate this fact when extended to include inventories. To explain the empirical inventory behavior, we therefore develop a framework that relies on the presence of knowledge capital accumulated through a learning-by-doing process. The desire to take advantage of higher future TFP through knowledge capital drives output and hours choices on the arrival of news and leads to inventory accumulation alongside the other macroeconomic variables. The broad-based comovement we document supports the view that news shocks are an important driver of aggregate fluctuations.
Subjects: 
news shocks
business cycles
inventories
knowledge capital
VAR
JEL: 
E20
E30
Document Type: 
Working Paper

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