The empirical importance of news shocks—anticipated future shocks—in business cycle fluctuations has been explored by using only actual data when estimating models augmented with news shocks. This paper additionally exploits forecast data to identify news shocks in a canonical...

Post-financial crisis recoveries tend to be slow and be accompanied by slowdowns in TFP and permanent losses in GDP. To prevent them, how should monetary policy be conducted? We address this issue by developing a model with endogenous TFP growth in which an adverse financial shock can induce a...