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Investment‐Specific News Shocks and U.S. Business Cycles
Author(s) -
Ben Zeev Nadav,
Khan Hashmat
Publication year - 2015
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12250
Subject(s) - business cycle , investment (military) , recession , consumption (sociology) , monetary economics , economics , variation (astronomy) , macroeconomics , political science , social science , physics , sociology , politics , astrophysics , law
We provide robust evidence that news shocks about future investment‐specific technology (IST) constitute a significant force behind U.S. business cycles. Positive IST news shocks induce comovement, that is, raise output, consumption, investment, and hours. These shocks account for 70% of the business cycle variation in output, hours, and consumption, and 60% of the variation in investment, and have played an important role in 9 of the last 10 U.S. recessions. Our findings provide strong support for shifting focus to IST news shocks when investigating the role of news in driving U.S. business cycles.