Reference

Patrick Fève, and Ahmat Jidoud, News Shocks, Information Flows and SVARs, Annales d'Économie et de Statistique, Paris : Institut national de la statistique et des études économiques, vol. 113-114, June 2014, pp. 293–308.

Abstract

This paper assesses SVARs as relevant tools at identifying the aggregate effects of news shocks. When the econometrician and private agents’ information sets are not aligned, the dynamic responses identified from SVARs are biased. However, the bias vanishes when news shocks account for the bulk of fluctuations in the economy. A simple correlation diagnostic test shows that under this condition, news shocks identified through long–run and short–run restrictions have a correlation close to unity.

Keywords

Information Flows; News shocks; Non–fundamentalness; SVARs; Identification

JEL codes

  • C32: Time-Series Models • Dynamic Quantile Regressions • Dynamic Treatment Effect Models • Diffusion Processes
  • C52: Model Evaluation, Validation, and Selection
  • E32: Business Fluctuations • Cycles

Patrick Fève, and Ahmat Jidoud, News Shocks, Information Flows and SVARs, TSE Working Paper, n. 12-286, March 2012.