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The Macroeconomic Effects of False Announcements

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  • Seonghwan Oh
  • Michael Waldman
Abstract
Suppose that the government were to announce the economy will be booming in six months, and this announcement is based on false data. What effect would such an announcement have on future aggregate activity? This paper employs revisions of the series of leading economic indicators to test the hypothesis that such an announcement would have a positive effect on future activity. We find that the evidence is generally consistent with the hypothesis and that for the time period 1976–1988 the expectational shocks measured by these revisions explain over 20 percent of the fluctuation in the quarterly growth rate of industrial production.

Suggested Citation

  • Seonghwan Oh & Michael Waldman, 1990. "The Macroeconomic Effects of False Announcements," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(4), pages 1017-1034.
    • Handle: RePEc:oup:qjecon:v:105:y:1990:i:4:p:1017-1034.
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    File URL: http://hdl.handle.net/10.2307/2937883
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