Identifying Noise Shocks: A VAR with Data Revisions

RICCARDO M. MASOLO, Alessia Paccagnini

    Research output: Contribution to journalArticle


    We propose a new Vector Autoregression (VAR) identification strategy to study the impact of noise, in the early releases of output growth figures, which exploits the informational advantage of the econometrician. Economic agents, uncertain about the underlying state of the economy, respond to noisy early data releases. Econometricians, with the benefit of hindsight, have access to data revisions as well, which we use to identify noise shocks. A surprising report of output growth produces qualitatively similar but quantitatively smaller effects than a demand shock. We also illustrate how a noise shock cannot be identified unless ex-post information is used.
    Original languageEnglish
    Pages (from-to)2145-2172
    JournalJournal of Money, Credit and Banking
    Issue number8
    Publication statusPublished - 2018


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