Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/232591
Authors: 
Di Casola, Paola
Sichlimiris, Spyridon
Year of Publication: 
2020
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 388
Abstract: 
Beaudry and Portier (2006) provide support for the "news view" of the business cycle, using a vector error correction model. We show that this result hinges on a cointegrating relationship between TFP and stock prices that is not stationary, thus making the estimates not reliable. If we alter the TFP measure and change the model specification, we can recover the news shock through their identification. However, the news shock leads to a stock market boom with a negligible impact on economic activity. Our findings are in line with studies that identify news shocks without relying on VEC models.
Subjects: 
cointegration
technology news shocks
stock prices
TFP
VEC model
SVAR
JEL: 
C32
G12
E32
E44
Document Type: 
Working Paper

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