Kiel Working Papers, Kiel Institute for World Economics
No 1542:
On the (de)stabilizing effects of news shocks
Roland Winkler and Hans-Werner Wohltmann
Abstract: This paper analyzes the impacts of news shocks on
macroeconomic volatility. Whereas anticipation amplifies volatility in any
purely forward-looking model, such as the baseline New Keynesian model, the
results are ambiguous when including a backward-looking component. In
addition to these theoretical findings, we use the estimated model of Smets
and Wouters (2003) to provide numerical evidence that news shocks increase
the volatility of key macroeconomic variables in the euro area when
compared to unanticipated shocks.
Keywords: Anticipated Shocks, Business Cycles, Volatility; (follow links to similar papers)
JEL-Codes: E32; (follow links to similar papers)
7 pages, August 2009
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