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Discussion Paper Details

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Title: News Driven Business Cycles: Insights and Challenges

Author(s): Paul Beaudry and Franck Portier

Publication Date: September 2013

Keyword(s): Business Cycles, Expectations, News, Pigou and Recessions

Programme Area(s): Financial Economics and International Macroeconomics

Abstract: There is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations. The news view of business cycles offers a formalization of this perspective. In this paper we discuss mechanisms by which changes in agents' information, due to the arrival of news, can cause business cycle fluctuations driven by expectational change, and we review the empirical evidence aimed at evaluating its relevance. In particular, we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations, while at the same time we emphasize the many challenges that must be addressed before a proper assessment of its role in business cycles can be established.

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Bibliographic Reference

Beaudry, P and Portier, F. 2013. 'News Driven Business Cycles: Insights and Challenges'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9624