The Library
Measuring the effects of expectations shocks
Tools
Tools
Tools
Clements, Michael P. and Galvão, Ana Beatriz (2021) Measuring the effects of expectations shocks. Journal of Economic Dynamics and Control, 124 . 104075. doi:10.1016/j.jedc.2021.104075 ISSN 0165-1889.
|
PDF
WRAP-measuring-effects-expectations-shocks-Galvão-2021.pdf - Accepted Version - Requires a PDF viewer. Available under License Creative Commons Attribution Non-commercial No Derivatives 4.0. Download (1297Kb) | Preview |
Official URL: http://dx.doi.org/10.1016/j.jedc.2021.104075
Abstract
We seek to improve the measurement of the dynamic causal effects of expectation shocks by addressing issues related to data uncertainty. The expectations shocks are estimated in a mixed-frequency VAR model which incorporates monthly and quarterly economic and financial indicators. The VAR is estimated on real-time data to prevent the shocks being confounded with the effects of data uncertainty. But dynamic responses are calculated using a quarterly VAR for revised data, estimated using older vintages as instruments to account for the fact that ‘true values’ of key macroeconomic variables may never be observed. We show that expectations shocks – revisions in GDP expectations unrelated to changes in current economic fundamentals and orthogonalized to other, potentially related shocks – explain 7–8% of the two-year variation of output, investment, consumption and hours. This is similar to the proportion of business-cycle variation explained by monetary shocks, for example.
| Item Type: | Journal Article | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HB Economic Theory Q Science > QA Mathematics |
||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
||||||||
| Library of Congress Subject Headings (LCSH): | Econometric models, Autoregression (Statistics), Macroeconomics -- Mathematical models, Rational expectations (Economic theory) | ||||||||
| Journal or Publication Title: | Journal of Economic Dynamics and Control | ||||||||
| Publisher: | Elsevier BV | ||||||||
| ISSN: | 0165-1889 | ||||||||
| Official Date: | March 2021 | ||||||||
| Dates: |
|
||||||||
| Volume: | 124 | ||||||||
| Article Number: | 104075 | ||||||||
| DOI: | 10.1016/j.jedc.2021.104075 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 17 February 2021 | ||||||||
| Date of first compliant Open Access: | 28 January 2023 |
Request changes or add full text files to a record
Repository staff actions (login required)
 |
View Item |
Downloads
Downloads per month over past year
