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Sectoral Media Focus and Aggregate Fluctuations

Author

Listed:
  • Ryan Chahrour

    (Boston College)

  • Kristoffer Nimark

    (Cornell University)

  • Stefan Pitschner

    (Uppsala University)

Abstract

We formalize the editorial role of news media in a multi-sector economy and show that media can be an independent source of business cycle fluctuations, even when the information they report is accurate. Our approach tightly links agents’ beliefs to real economic developments and allows for incomplete information without exogenous noise shocks. In the model, media monitor the economy, making state-dependent decisions on which subset of sectors to report. Accurate public reporting about sectoral developments that are newsworthy but unrepresentative, causes firms in all sectors to over- or underinvest in productive capacity. We construct historical time series of sectoral news coverage in the US and use them to calibrate a multi-sector model driven only by sectoral TFP shocks. Time-varying media focus generates demand-like aggregate fluctuations that are orthogonal to productivity. Presented with historical productivity shocks constructed by the BEA, the model reproduces the 2009 Great Recession.

Suggested Citation

  • Ryan Chahrour & Kristoffer Nimark & Stefan Pitschner, 2019. "Sectoral Media Focus and Aggregate Fluctuations," Boston College Working Papers in Economics 987, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:987
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    References listed on IDEAS

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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. Vito Cormun & Kim Ristolainen, 2024. "Exchange Rate Narratives," Discussion Papers 167, Aboa Centre for Economics.
    4. Hilde C. Bjørnland & Roberto Casarin & Marco Lorusso & Francesco Ravazzolo, 2023. "Fiscal Policy Regimes in Resource-Rich Economies," Working Papers No 13/2023, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    5. Bertsch, Christoph & Hull, Isaiah & Zhang, Xin, 2021. "Narrative fragmentation and the business cycle," Economics Letters, Elsevier, vol. 201(C).
    6. 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.
    7. Luca Gambetti & Nicolò Maffei-Faccioli & Sarah Zoi, 2022. "Bad News, Good News: Coverage and Response Asymmetries," Working Paper 2022/8, Norges Bank.
    8. 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.
    9. 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.
    10. Dräger, Lena, 2023. "Central Bank Communication with the General Public," Hannover Economic Papers (HEP) dp-713, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    11. Ryan Chahrour & Adam Hale Shapiro & Daniel J. Wilson, 2024. "News Selection and Household Inflation Expectations," Working Paper Series 2024-31, Federal Reserve Bank of San Francisco.
    12. Zheng, Hannan & Schwenkler, Gustavo, 2020. "The network of firms implied by the news," ESRB Working Paper Series 108, European Systemic Risk Board.
    13. Jacopo Perego & Sevgi Yuksel, 2022. "Media Competition and Social Disagreement," Econometrica, Econometric Society, vol. 90(1), pages 223-265, January.
    14. 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

    Keywords

    News media; Business Cycles; Information frictions; Sectoral linkages;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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