Mood Swings and Business Cycles: Evidence from Sign Restrictions
| Autor: | Jian Wang, Deokwoo Nam |
|---|---|
| Rok vydání: | 2018 |
| Předmět: |
Economics and Econometrics
050208 finance media_common.quotation_subject Mood swing 05 social sciences Monetary economics Pessimism Shock (economics) Optimism Accounting 0502 economics and business Business cycle Economics medicine 050207 economics medicine.symptom Total factor productivity Finance media_common Sign (mathematics) |
| Zdroj: | Journal of Money, Credit and Banking. 51:1623-1649 |
| ISSN: | 1538-4616 0022-2879 |
| Popis: | This paper provides new evidence that bouts of optimism and pessimism are an important source of U.S. business cycles, using the identification schemes based on sign restrictions. We document that identified optimism and pessimism shocks account for about 30% of U.S. business‐cycle fluctuations in hours and output. In addition, our empirical findings are consistent with the intensive‐ and extensive‐margin adjustments in the U.S. labor market over business cycles, providing further support to optimism shocks being an important source of U.S. business cycles. The identified optimism shocks are at least partially rational as total factor productivity is found to rise 8–12 quarters after an initial bout of optimism. While this later finding is consistent with some previous findings in the news shock literature, we cannot rule out that such episodes reflect self‐fulfilling beliefs. |
| Databáze: | OpenAIRE |
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