TY - JOUR
T1 - Investment specific technology, news, sentiment, and fluctuations
T2 - Evidence from nowcast data
AU - Ma, Xiaohan
N1 - Publisher Copyright:
© 2018 Elsevier Inc.
Copyright:
Copyright 2018 Elsevier B.V., All rights reserved.
PY - 2018/9
Y1 - 2018/9
N2 - Investment specific technology is an important driver of the U.S. business cycles. In this paper, I employ nowcast data and the forecast error variance decomposition method to empirically assess the role of investment specific technology surprise shocks, news shocks and sentiment shocks separately. The surprise shock represents unanticipated innovations to the technology; the news shock captures the (correct) expectation of future technological changes; the sentiment shock is orthogonal to the identified surprise and news shocks, which maximizes the short run forecast error variance of nowcast of investment. The results suggest that the sentiment shock accounts for a substantial portion of fluctuations in output and investment in the short run. In the medium run, the news shock is increasingly important. The surprise innovation plays a very small role in the explanation of economic dynamics. These findings underline the empirical contribution of investment specific news and sentiment shocks to business cycle fluctuations.
AB - Investment specific technology is an important driver of the U.S. business cycles. In this paper, I employ nowcast data and the forecast error variance decomposition method to empirically assess the role of investment specific technology surprise shocks, news shocks and sentiment shocks separately. The surprise shock represents unanticipated innovations to the technology; the news shock captures the (correct) expectation of future technological changes; the sentiment shock is orthogonal to the identified surprise and news shocks, which maximizes the short run forecast error variance of nowcast of investment. The results suggest that the sentiment shock accounts for a substantial portion of fluctuations in output and investment in the short run. In the medium run, the news shock is increasingly important. The surprise innovation plays a very small role in the explanation of economic dynamics. These findings underline the empirical contribution of investment specific news and sentiment shocks to business cycle fluctuations.
KW - Investment specific technology
KW - Macroeconomic dynamics
KW - News
KW - Nowcast
KW - Sentiment
UR - http://www.scopus.com/inward/record.url?scp=85047622394&partnerID=8YFLogxK
U2 - 10.1016/j.jmacro.2018.05.006
DO - 10.1016/j.jmacro.2018.05.006
M3 - Article
AN - SCOPUS:85047622394
VL - 57
SP - 55
EP - 70
JO - Journal of Macroeconomics
JF - Journal of Macroeconomics
SN - 0164-0704
ER -