We provide robust evidence that news shocks about future investment-specific technology (IST) constitute a significant force behind U.S. business cycles. Positive IST news shocks induce comovement, that is, raise output, consumption, investment, and hours. These shocks account for 70% of the business cycle variation in output, hours, and consumption, and 60% of the variation in investment, and have played an important role in 9 of the last 10 U.S. recessions. Our findings provide strong support for shifting focus to IST news shocks when investigating the role of news in driving U.S. business cycles.

Additional Metadata
Keywords Business cycles, Investment-specific technology, News shocks
Persistent URL dx.doi.org/10.1111/jmcb.12250
Journal Journal of Money, Credit and Banking
Ben Zeev, N. (Nadav), & Khan, H.U. (2015). Investment-Specific News Shocks and U.S. Business Cycles. Journal of Money, Credit and Banking, 47(7), 1443–1464. doi:10.1111/jmcb.12250