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Sectoral Media Focus and Aggregate Fluctuations

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  • Ryan Chahrour
  • Kristoffer Nimark
  • Stefan Pitschner

Abstract

We formalize the editorial role of news media in a multisector economy and show that media can be an independent source of business cycle fluctuations, even when they report accurate information. Public reporting about a subset of sectoral developments that are newsworthy but unrepresentative causes firms across all sectors to hire too much or too little labor. We construct historical measures of US sectoral news coverage and use them to calibrate our model. Time-varying media focus generates demand-like fluctuations that are orthogonal to productivity, even in the absence of non-TFP shocks. Presented with historical sectoral productivity, the model reproduces the 2009 Great Recession.

Suggested Citation

  • Ryan Chahrour & Kristoffer Nimark & Stefan Pitschner, 2021. "Sectoral Media Focus and Aggregate Fluctuations," American Economic Review, American Economic Association, vol. 111(12), pages 3872-3922, December.
    • Handle: RePEc:aea:aecrev:v:111:y:2021:i:12:p:3872-3922
    DOI: 10.1257/aer.20191895
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    Cited by:

    1. Isaac Baley & Laura Veldkamp, 2021. "Bayesian learning," Economics Working Papers 1797, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Born, Benjamin & Enders, Zeno & Menkhoff, Manuel & Müller, Gernot & Niemann, Knut, 2022. "Firm Expectations and News: Micro v Macro," CEPR Discussion Papers 17768, C.E.P.R. Discussion Papers.
    3. repec:bny:wpaper:0125 is not listed on IDEAS
    4. Bertsch, Christoph & Hull, Isaiah & Zhang, Xin, 2021. "Narrative fragmentation and the business cycle," Economics Letters, Elsevier, vol. 201(C).
    5. Ehrmann, Michael & Gnan, Phillipp & Rieder, Kilian, 2023. "Central Bank Communication by ??? The Economics of Public Policy Leaks," CEPR Discussion Papers 18152, C.E.P.R. Discussion Papers.
    6. Luca Gambetti & Nicolò Maffei-Faccioli & Sarah Zoi, 2022. "Bad News, Good News: Coverage and Response Asymmetries," Working Paper 2022/8, Norges Bank.
    7. Born, Benjamin & Enders, Zeno & Müller, Gernot J., 2023. "On FIRE, news, and expectations," Working Papers 42, German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin.
    8. Alistair Macaulay & Wenting Song, 2022. "Narrative-Driven Fluctuations in Sentiment: Evidence Linking Traditional and Social Media," Economics Series Working Papers 973, University of Oxford, Department of Economics.
    9. Dräger, Lena, 2023. "Central Bank Communication with the General Public," Hannover Economic Papers (HEP) dp-713, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    10. Zheng, Hannan & Schwenkler, Gustavo, 2020. "The network of firms implied by the news," ESRB Working Paper Series 108, European Systemic Risk Board.
    11. Jacopo Perego & Sevgi Yuksel, 2022. "Media Competition and Social Disagreement," Econometrica, Econometric Society, vol. 90(1), pages 223-265, January.
    12. Philippe Andrade & Olivier Coibion & Erwan Gautier & Yuriy Gorodnichenko, 2020. "No Firm is an Island? How Industry Conditions Shape Firms' Aggregate Expectations," NBER Working Papers 27317, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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