In this paper I propose a novel method of identifying technological news shocks through instrumental variables based on forecast revisions from professional forecasters. The procedure has the advantage of relying on information about agents' expectations, instead of the statistical procedures currently used for the news shock identification. I construct proxy measures for the slope of the long-run trend of GDP, investment and industrial production, which are strong instruments for recovering the underlying technological news shock. By employing a proxy SVAR, I show that a news shock produces substantial effects on impact on GDP and investment. The effects on consumption in the short-run, however, are milder than usually presented by the news shock literature. The identified news shock is able to generate a positive comovement among the real macroeconomic variables.
Gerald P. Dwyer prize for the best paper in finance presented by a graduate student at the 26th Symposium of the Society of Nonlinear Dynamics and Econometrics (2018)
This paper bridges two strands of the literature of business cycles driven by agents' beliefs: news shocks and uncertainty. I propose an estimation and identification procedure that allows investigating the empirical relationship between agents' responses to future technological improvements and the level of uncertainty in the economy. I show that the economic responses to news shocks change substantially over time, and uncertainty endogenously reacts to it. Macroeconomic uncertainty reduces after a news shock, in response to the increase in the information about the expected future path of the economy. Financial uncertainty initially increases after a news shock, in line with the idea of 'good uncertainty'. The financial uncertainty rapidly resolves, as the market converges to a consensus about the interpretation of the news. Periods of high financial uncertainty are characterized by higher positive economic effects of news shocks on output, consumption and investment. These results indicate that the continuous updating of agents' expectations about the current and future economic situation operates as a transmission channel for news shocks.
This version: November, 2018
Revise & resubmit at the Journal of Money, Credit and Banking.
International Finance Discussion Paper #1240 (Federal Reserve Board)
We provide novel evidence that technological news and uncertainty shocks, identified one at a time using VAR models as in the literature, are correlated; that is, they are not truly structural. We then proceed by proposing an identification scheme to disentangle the effects of news and financial uncertainty shocks. We find that by removing uncertainty effects from news shocks, the positive responses of economic activity to news shocks are strengthened in the short term; and that the negative responses of activity to financial uncertainty shocks are deepened in the medium term as 'good uncertainty' effects on technology are purged.
American Economic Review, 107(10): 3243-49.
Kurmann and Otrok (2013) establish that the effects on economic activity from news on future productivity growth are similar to the effects from unexpected changes in the slope of the yield curve. This comment shows that these results become substantially weaker in the light of a recent update in the utilization-adjusted total factor productivity series produced by Fernald (2014).
- "Labor and technical progress: an analysis on the employment, income and qualification levels in the São Paulo industry" (in Portuguese), with B. Selan and S. Kannebley Jr. (2009)
Revista Economia ANPEC. v. 10, p. 277-297.