Abstract: This paper investigates the impact of anticipated (news) shocks on renewable and fossil energy use in the U.S. economy. Using structural vector autoregressions (SVARs), we identify the news shocks captured in energy stock market indexes. Our findings show that renewable and fossil energy news shocks significantly affect economic activity, revealing the tensions between the traditional fossil fuel-based industries and the emerging green technology-based ones. We further identify news shocks on Economic Policy Uncertainty (EPU) index, as policy is a key factor driving the changes in the energy mix. First, we show that the identified anticipated shocks have very different propagation mechanisms from traditional surprise shocks. Then, we find that the combination of news shocks to energy stock prices and economic policy uncertainty jointly account for about 90% of the variability of output, job openings and house prices. To interpret our findings, we use a DSGE model that incorporates fossil and renewable energy sectors, and news shocks as a driving force. We show that the propagation mechanisms of news shocks in the model are consistent with our empirical observations. Our study illustrates on the critical interaction between energy news and economic policy uncertainty in affecting the real economy in the transition from dirty to clean energy technologies.

Abstract: We examine the asymmetric effects of financial instability shocks and their volatility on the conventional and renewable energy mix. We utilize Chicago Board Options Exchange (CBOE) Volatility Index (VIX) and the Volatility-of-Volatility index (vVIX) in a nonlinear autoregressive distributed lag (NARDL) model to estimate the short- and long-term asymmetry effects across energy mix in Europe, the US, and China. Furthermore, we examine the dynamic long-run asymmetry of financial instability shocks and their volatility on the energy sector and how this relationship evolves over time. The results show that the responses to the volatility of financial instability, vVIX, are different from the responses to financial instability itself, VIX, and revealed a more pronounced impact on changes in vVIX compared to VIX. Our estimation indicate that the long-term effects over the energy mix are more significant than their short-term effects.

Abstract: We investigate how the economy responds to anticipated (news) shocks to future investment decisions. Using structural vector autoregressions (SVARs), we show that news about the future relative price of residential investment explains a high fraction of the variance of output, aggregate investment and residential investment for Spain. In contrast, for Germany it is the news shocks on business structures and equipment that explain a higher fraction of the variance of output, consumption and non-residential investment. We confront the identified shock with other shocks to provide evidence that our structural interpretation is valid. Then, to interpret our empirical findings, we propose a stylized two-sector model of the willingness to substitute current consumption for future investment in housing, structures or equipment. The model combines a wealth effect driven by the expectation of rising house prices, with a reduced-form friction in labor reallocation. We find that the model calibrated for Spain displays a response to anticipated house price shocks that stimulate residential investment, whereas for Germany those shocks enhance investment in equipment and structures. The results highlight the propagation mechanism of anticipated shocks to future investment, which is consistent with the housing booms in Spain and their absence in Germany. Such a mechanism complements a view relying on a combination of monetary, financial or housing supply and demand, surprise shocks.

Abstract: This paper investigates the effects of aggregate news shocks over the Spanish business cycle in the period 1970 - 2015. More precisely, I assess whether the news shocks drove economic fluctuations by enhancing the creation of new investment opportunities, i.e. increasing investment in residential structures in Spain. In a structural bivariate vector autoregressive approach, I identify the effects of news shocks on total factor productivity (TFP) and the IBEX 35 as representing the value of the firms. The analysis suggests that the TFP has no response on impact to innovation in stock prices although is gradually decreasing, while the stock prices increase is permanent. The results are consistent with the pattern implied by the news view of fluctuations, capturing the empirical evidence of the Spanish TFP stagnation over the two last decades. My interpretation is that the results may provide evidence that expected changes in investment opportunities might be central to business cycle fluctuations in the Spanish economy, contrary to surprise changes in productivity which are not.

Abstract: This paper reviews different structural VAR methodologies used in the literature to identify news shock dynamics. I discuss the strategies for isolating news shocks by illustrating the empirical problems of identifying them relying on reduced form time series techniques. I analyze the assumptions for identification schemes using alternative restrictions: short run, long run, and the maximum forecast error variance approach. Detailing on each identification methodology, I use Spanish data to test these SVAR techniques analyzing to what extent different orthogonalization schemes can lead to quite different results.