Type: Working Paper
What can we learn about news shocks from the late 1990s and early 2000s boom-bust period?
Working Paper, EUI MWP, 2013/25
BEN ZEEV, Nadav, What can we learn about news shocks from the late 1990s and early 2000s boom-bust period?, EUI MWP, 2013/25 - https://hdl.handle.net/1814/28297
Retrieved from Cadmus, EUI Research Repository
The boom-bust period of 1997-2003 is commonly viewed as an expectations-driven episode in which overly optimistic expectations about information and communications technology (ICT) were followed by their downward revision. Given that ICT is strongly related to technology in the broader producer and consumer durable goods sectors, this unique period can be used to identify news shocks about investment-specific technology (IST). Specifically, this paper proposes and implements novel identifying restrictions for identifying IST news shocks based on the notion that this period is arguably the most significant and apparent IST news-driven period in post-war data. In particular, I demonstrate via a variety of Vector Autoregression (VAR) models the robust result that the shock which i) has a long-run effect on the relative price of investment and ii) has its maximal sum of realizations, among all three-year period sums, in the 1997-1999 boom period followed by a negative sum in the bust period, is a shock that raises output, hours, investment, and consumption, and accounts for the majority of their business cycle variations.
This is a substantially revised version of the paper previously circulated as “A New VAR-Based Approach to Identifying News Shocks”.
Cadmus permanent link: https://hdl.handle.net/1814/28297
Series/Number: EUI MWP; 2013/25