Can News Be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach

Ippei Fujiwara, Yasuo Hirose, Mototsugu Shintani

Research output: Contribution to journalArticlepeer-review

63 Citations (Scopus)


We examine whether the news shocks, as explored in Beaudry and Portier (2004), can be a major source of aggregate fluctuations. For this purpose, we extend a standard dynamic stochastic general equilibrium model of Christiano, Eichenbaum, and Evans (2005) and Smets and Wouters (2003, 2007) by allowing news shocks on the total factor productivity (TFP), and estimate the model using Bayesian methods. Estimation results on the U.S. and Japanese economies suggest that (i) news shocks play a relatively more important role in the United States than in Japan, (ii) a news shock with a longer forecast horizon has larger effects on nominal variables, and (iii) the overall effect of the TFP on hours worked becomes ambiguous in the presence of news shocks.

Original languageEnglish
Pages (from-to)1-29
Number of pages29
JournalJournal of Money, Credit and Banking
Issue number1
Publication statusPublished - 2011 Feb


  • Bayesian estimation
  • Business cycles
  • News

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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