[PDF] Identifying News Shocks With Forecast Data eBook

Author : Jonathan J. Adams
Publisher : International Monetary Fund
Page : 78 pages
File Size : 49,97 MB
Release : 2023-09-29
Category : Business & Economics
ISBN :

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We propose a method to identify the anticipated components of macroeconomic shocks in a structural VAR. We include empirical forecasts about each time series in the VAR. This introduces enough linear restrictions to identify each structural shock and to further decompose each one into “news” and “surprise” shocks. We estimate a VAR on US time series using forecast data from the SPF, CBO, Federal Reserve, and asset prices. Unanticipated fiscal stimulus and interest rate shocks we identify have typical effects that match existing evidence. In our news-surprise decomposition, we find that news drives around one quarter of US business cycle volatility. News explains a larger share of the variance due to fiscal shocks than for monetary policy shocks. Finally, we use the news structure of the shocks to estimate counterfactual policy rules, and compare the ability of fiscal and monetary policy to moderate output and inflation. We find that coordinated fiscal and monetary policy are substantially more effective than either tool is individually.

Author : Yasuo Hirose
Publisher :
Page : 0 pages
File Size : 21,79 MB
Release : 2012
Category :
ISBN :

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Recent studies attempt to quantify the empirical importance of news shocks (ie., anticipated future shocks) in business cycle fluctuations. This paper identifies news shocks in a dynamic stochastic general equilibrium model estimated with not only actual data but also forecast data. The estimation results show new empirical evidence that anticipated future technology shocks are the most important driving force of U.S. business cycles. The use of the forecast data makes the anticipated shocks play a much more important role in fitting model-implied expectations to this data, since such shocks have persistent effects on the expectations and thereby help to replicate the observed persistence of the forecasts.

Author : Wataru Miyamoto
Publisher :
Page : 57 pages
File Size : 33,25 MB
Release : 2017
Category :
ISBN :

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This paper proposes to exploit data on expectations to identify news shocks in business cycles. News shocks work through changes in expectations, so data on expectations contain important information for identification. We demonstrate this by estimating a DSGE model augmented with news shocks using U.S. data between 1955Q1 and 2006Q4. News shocks only generate modest business cycles before fundamental changes. The precision of the estimated news shocks greatly improves when data on expectations are used. These results arise because data on expectations are smooth and do not resemble actual output.

Author : Holger Kömm
Publisher : Springer
Page : 188 pages
File Size : 23,75 MB
Release : 2016-02-08
Category : Business & Economics
ISBN : 3658125969

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This thesis presents a new strategy that unites qualitative and quantitative mass data in form of text news and tick-by-tick asset prices to forecast the risk of upcoming volatility shocks. Holger Kömm embeds the proposed strategy in a monitoring system, using first, a sequence of competing estimators to compute the unobservable volatility; second, a new two-state Markov switching mixture model for autoregressive and zero-inflated time-series to identify structural breaks in a latent data generation process and third, a selection of competing pattern recognition algorithms to classify the potential information embedded in unexpected, but public observable text data in shock and nonshock information. The monitor is trained, tested, and evaluated on a two year survey on the prime standard assets listed in the indices DAX, MDAX, SDAX and TecDAX.

Author : Pavel S. Kapinos
Publisher :
Page : 37 pages
File Size : 34,72 MB
Release : 2017
Category :
ISBN :

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This paper revisits the effects of news shocks in the context of an otherwise standard New Keynesian dynamic general equilibrium (DSGE) model. We use the U.S. real-time forecasts from the Federal Reserve's Green Book to model agents' and the central bank's expectations of future macroeconomic outcomes. We show that unlike with the ex post data where the identification of news shocks is driven by the modeling assumptions, the identification strategy that relies on the Greenbook forecasts ascribes a larger role to news shocks in explaining variation in the model's endogenous variables. Furthermore, we demonstrate that the presence of sizable news shocks explains the emergence of the price puzzle in the structural vector autoregressive framework.

Author : Filippo Ferroni
Publisher :
Page : 0 pages
File Size : 18,74 MB
Release : 2022
Category :
ISBN :

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We propose an event-study research design to identify the nature and propagation of large unusual shocks in DSGE models and apply it to study the macroeconomic effects of the Covid shock. The initial outbreak is represented as the onset of a new shock process where the shock loads on wedges associated with the model's usual shocks. Realizations of the Covid shock come with news about its propagation, allowing us to disentangle the role of beliefs about the future of the pandemic. The model attributes a crucial role to the novel Covid shock in explaining the large contraction in output in the second quarter of 2020 and the rebound in growth expected at the same time. The Covid shock loads significantly on wedges that generate both demand and supply effects but, on net, supply forces dominate. The effects of Covid on hours worked are quite persistent, although the successive pandemic waves (e.g., the Delta wave) have a progressively smaller impact on the macroeconomy. Our methods provide a foundation to estimate structural models with data that include the pandemic without having to specify a micro-founded epidemiological block.

Author : Mr.Rabah Arezki
Publisher : International Monetary Fund
Page : 54 pages
File Size : 49,18 MB
Release : 2015-09-29
Category : Business & Economics
ISBN : 1513590766

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This paper explores the effect of news shocks on the current account and other macroeconomic variables using worldwide giant oil discoveries as a directly observable measure of news shocks about future output ? the delay between a discovery and production is on average 4 to 6 years. We first present a two-sector small open economy model in order to predict the responses of macroeconomic aggregates to news of an oil discovery. We then estimate the effects of giant oil discoveries on a large panel of countries. Our empirical estimates are consistent with the predictions of the model. After an oil discovery, the current account and saving rate decline for the first 5 years and then rise sharply during the ensuing years. Investment rises robustly soon after the news arrives, while GDP does not increase until after 5 years. Employment rates fall slightly for a sustained period of time.