Animal spirits, fundamental factors and business cycle fluctuations
DEES, Stephane
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
DEES, Stephane
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
< Reduce
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
Language
EN
Article de revue
This item was published in
Journal of Macroeconomics. 2019-09, vol. 61, p. 103-123
English Abstract
This paper explores empirically the role of noisy information in cyclical developments and aims at separating fluctuations that are due to genuine changes in fundamentals from those due to temporary animal spirits or ...Read more >
This paper explores empirically the role of noisy information in cyclical developments and aims at separating fluctuations that are due to genuine changes in fundamentals from those due to temporary animal spirits or expectational errors (noise shocks). Exploiting the fact that the econometrician has a richer data-set in some dimensions than the consumers, we use a novel identification scheme in a structural vector-autoregressive (SVAR) framework. Our results show that noise shocks are more important for business cycle fluctuations than permanent (or technology) shocks. We also show that technology shocks turn negative a few years before recessions, while noise shocks are very positive at the cycle peaks. By contrast, the recovery from recessions is mostly led by technology shocks, noise shocks remaining negative for some time during this business cycle phase.Read less <