Do News Shocks Drive Business Cycles? Evidence from German Data [Dataset]

We study the Beaudry and Portier (2006)-hypothesis of delayed-technology diffusion and
news-driven business cycles. For German data on TFP and stock prices we find qualitatively
similar empirical evidence. Quantitatively, however, an impulse response analysis suggests
that a substantial part of the total TFP response is immediate rather than delayed. We relate
this to disembodied technological change and noisy data on TFP. Nevertheless, we confirm
the technology interpretation of structural shocks by showing that they are Granger-causal for
data on patents granted by the Ge
rman patent agency. We also show that these shocks
generate comovement of macro variables at business cycle horizons and account for a sizable
share of the forecast error variance of these variables in the medium and long run.