Does demand noise matter? Identification and implications - Aix-Marseille Université Access content directly
Journal Articles Journal of Monetary Economics Year : 2021

Does demand noise matter? Identification and implications

Abstract

We assess the role of demand noise (excessive optimism or pessimism about demand) together with supply noise (excessive optimism or pessimism about supply). To do so, we propose a methodology to decompose business cycles into supply, demand, supply noise and demand noise shocks, using a structural vector autoregression model. Key to our identification of both supply noise and demand noise is the use of sign restrictions on survey expectation errors about output growth and about inflation. We show that demand-related noise shocks have a negative effect on output and contribute substantially to its fluctuations. Monetary policy and private information seem to play a key role in the transmission of demand noise shocks.
Fichier principal
Vignette du fichier
Poilly_Does demand noise matter.pdf (1.19 Mo) Télécharger le fichier
Origin : Files produced by the author(s)

Dates and versions

hal-03173423 , version 1 (29-01-2022)

Licence

Attribution - NonCommercial - NoDerivatives

Identifiers

Cite

Kenza Benhima, Céline Poilly. Does demand noise matter? Identification and implications. Journal of Monetary Economics, 2021, 117, pp.278-295. ⟨10.1016/j.jmoneco.2020.01.006⟩. ⟨hal-03173423⟩
38 View
68 Download

Altmetric

Share

Gmail Facebook X LinkedIn More