News or noise? the missing link

Scholarly Edition

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.

Full Text

Duke Authors

Cited Authors

  • Chahrour, R; Jurado, K

Published Date

  • July 1, 2018

Start / End Page

  • 1702 - 1736

Digital Object Identifier (DOI)

  • 10.1257/aer.20170792

Citation Source

  • Scopus