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Aggregate Information Dynamics

Author

Listed:
  • Kyriakos Chousakos

    (Yale University)

  • Gary Gorton

    (Yale University)

  • Guillermo Ordonez

    (University of Pennsylvania)

Abstract

The amount of information produced in an economy varies over time depending on the state of the macro economy. We define movements in aggregate economic activity very agnostically and introduce new ways to characterize aggregate economic activity based on information in stock prices. We empirically investigate changes in economy-wide measures of information and changes in aggregate economic fragility as aggregate economic activity changes based on the level of real GDP. We find that our stock price-based measures of information are significant in predicting recessions with and without a financial crisis. We then show evidence of a feedback effect to investment from the information produced especially during recessions associated with crises. Finally, we document the presence of a global information factor; information produced in advanced countries can predict financial crises in emerging markets and results in reallocation at a global level via capital flows among countries.

Suggested Citation

  • Kyriakos Chousakos & Gary Gorton & Guillermo Ordonez, 2018. "Aggregate Information Dynamics," 2018 Meeting Papers 167, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:167
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    References listed on IDEAS

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