New Investment Study Results from Federal Reserve Bank of Kansas City Described (Identifying News Shocks From Forecasts): Investment

2026 AUG 17 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Investigators publish new report on Investment. According to news reporting originating in Kansas City, Missouri, by NewsRx journalists, research stated, “We propose a method to identify the anticipated components of macroeconomic shocks in a structural VAR. We include empirical forecasts about each time series in the VAR.”

The news reporters obtained a quote from the research from the Federal Reserve Bank of Kansas City, “This introduces enough linear restrictions to identify every structural shock and to further decompose each one into ‘news’ and ‘surprise’ shocks. We estimate a VAR on U.S. time series using forecast data from the SPF, CBO, Federal Reserve, and asset prices. Unanticipated fiscal stimulus and monetary policy shocks have typical effects that match existing evidence. In our news-surprise decomposition, we find that news drives around one quarter of U.S. business cycle volatility. News explains a larger share of the variance due to fiscal shocks than for monetary policy shocks. Finally, we use the news structure of the shocks to estimate counterfactual policy rules, and compare the ability of fiscal and monetary policy to moderate output and inflation.”

According to the news reporters, the research concluded: “We find that coordinated fiscal and monetary policy are substantially more effective than either individually.”

This research has been peer-reviewed.

For more information on this research see: Identifying News Shocks From Forecasts. Journal of Applied Econometrics, 2026. Journal of Applied Econometrics can be contacted at: Wiley, 111 River St, Hoboken 07030-5774, NJ, USA. (Wiley-Blackwell - http://www.wiley.com/; Journal of Applied Econometrics - http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1255)

Our news correspondents report that additional information may be obtained by contacting Jonathan J. Adams, Federal Reserve Bank of Kansas City, Kansas City, MO 64198, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1002/jae.70081. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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