Information Flows and News Driven Business Cycles ∗

  title={Information Flows and News Driven Business Cycles ∗},
  author={Todd B. Walker and Eric M. Leeper},
How do information flows influence business cycle dynamics in models with anticipated (news shocks) and unanticipated innovations? To address this question, we show how alternative specifications of news affect the equilibrium by deriving the mapping between news shocks and the endogenous variables in a simple analytical model. News shocks are shown to add moving average (MA) components to endogenous variables. We then show how the additional MA components affect equilibrium dynamics. We… CONTINUE READING
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