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  3. American Economic Review
  4. July 2018
  5. News or Noise? The Missing Link

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

News or Noise? The Missing Link

  • Ryan Chahrour
  • Kyle Jurado
American Economic Review
vol. 108, no. 7, July 2018
(pp. 1702–36)
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Abstract

The literature on belief-driven business cycles treats news and noise as distinct representations of agents' beliefs. We prove they are empirically the same. Our result lets us isolate the importance of purely belief-driven fluctuations. Using three prominent estimated models, we show that existing research understates the importance of pure beliefs. We also explain how differences in both economic environment and information structure affect the estimated importance of pure beliefs.

Citation

Chahrour, Ryan, and Kyle Jurado. 2018. "News or Noise? The Missing Link." American Economic Review 108 (7): 1702–36. DOI: 10.1257/aer.20170792

Additional Materials

JEL Classification

  • D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
  • D84 Expectations; Speculations
  • E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian
  • E23 Macroeconomics: Production
  • E32 Business Fluctuations; Cycles