Sectoral Media Focus and Aggregate Fluctuations
Ryan Chahrour, Kristoffer Nimark, Stefan Pitschner
American Economic Review · 2021 · Volume 111 · Issue 12
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.
Keywords
Firm Behavior: Empirical Analysis, Search, Learning, Information and Knowledge, Communication, Belief, Unawareness, Business Fluctuations, Cycles, Entertainment, Media
Enable JavaScript for citation tools and additional paper interactions.