An important disconnect in the news driven view of the business cycle formalizedudby Beaudry and Portier (2004), is the lack of agreement between different—VARudand DSGE—methodologies over the empirical plausibility of this view. We argueudthat this disconnect can be largely resolved once we augment a standard DSGEudmodel with a financial channel that provides amplification to news shocks. Bothudmethodologies suggest news shocks to the future growth prospects of the economy toudbe significant drivers of U.S. business cycles in the post-Greenspan era (1990-2011),udexplaining as much as 50% of the forecast error variance in hours worked in cyclicaludfrequencies
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