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Sectoral Effects of News Shocks
Author(s) -
Vukotić Marija
Publication year - 2019
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12269
Subject(s) - durable good , margin (machine learning) , economics , shock (circulatory) , aggregate (composite) , monetary economics , macroeconomics , computer science , medicine , materials science , machine learning , composite material
This paper argues that an aggregate news shock reveals news about technological improvements in the durable goods sector. Better technological prospects translate into large responses of the fundamentals in the durable goods sector; much larger than the responses of the fundamentals in the non‐durable goods sector. These better technological prospects, contrary to common belief, do not induce short‐run comovement among fundamentals within either of the two sectors. The behaviour of inventories, an important margin that durable goods producers can use to buffer news shocks, proves to be crucial for reconciling the effects of news shocks in a two‐sector model with the data.