DP11818 A note on news about the future: the impact on DSGE models and their VAR representation

Author(s): Vo Phuong Mai Le, David Meenagh, Patrick Minford
Publication Date: January 2017
Keyword(s): DSGE, indirect inference, news shocks, VAR
JEL(s):
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11818

In this paper we investigate the role of news shocks in aggregate fluctuations by comparing the empirical performance of models with and without the feature of the news shocks. We found a trivial difference between the two models. That is, the model with news shocks explains the variation as well as the alternative. The reason is that the news shocks can only advance the date at which agents know about the changes, but they do not change the stochastic structure of the model.