[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-297147-105":59,"doc-detail-297147-en":131},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":124,"head_meta":126,"extra_data":128,"updated_unix":130},105,"en","estimating-macroeconomic-news-and-surprise-shocks","Estimating Macroeconomic News and Surprise Shocks","","Understanding how total factor productivity (TFP) news and surprise shocks affect the economy is central in the literature. A common structural VAR strategy uses a TFP max share criterion over a long horizon to identify responses to TFP news shocks, which may also imply the surprise component under conditions. The results show strong bias in these TFP max share estimators with DSGE-generated data, both with and without TFP measurement error. Adding an explicit TFP news measure and adapting identification sharply lowers bias and RMSE, while applications indicate slower TFP diffusion and smaller effects on real activity than the max share approach suggests.",{"@graph":69,"@context":123},[70,84,106],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/estimating-macroeconomic-news-and-surprise-shocks/297147/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/estimating-macroeconomic-news-and-surprise-shocks/297147.png","ImageObject",300,407,{"name":92,"@type":93},"Sage","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-18","2026-09-18",true,{"@type":102,"interactionType":103,"userInteractionCount":105},"InteractionCounter",{"@type":104},"ViewAction",13,{"@type":107,"mainEntity":108},"FAQPage",[109,115,119],{"name":110,"@type":111,"acceptedAnswer":112},"What is the “TFP max share” approach used in the paper?","Question",{"text":113,"@type":114},"It identifies TFP news shocks in a structural VAR by choosing parameters to maximize the forecast error variance share of TFP over a long horizon, which can also imply a surprise shock estimate under suitable conditions.","Answer",{"name":116,"@type":111,"acceptedAnswer":117},"Why can the TFP max share estimators be biased?",{"text":118,"@type":114},"They can become strongly biased when applied to DSGE-generated data where the shock processes match TFP moments in the data, regardless of whether TFP measurement error is present.",{"name":120,"@type":111,"acceptedAnswer":121},"How does the proposed method improve impulse response estimates?",{"text":122,"@type":114},"The approach incorporates a direct measure of TFP news into the VAR model and adapts the identification strategy, substantially reducing both bias and RMSE even with sizable measurement error in the news variable.","https://schema.org",{"og:url":83,"og:type":125,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":127,"canonical":83},"index,follow",{"doc_id":129,"site_id":62},297147,1789741319,{"code":4,"msg":5,"data":132},{"doc_id":129,"user_id":133,"nickname":92,"user_avatar":134,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":135,"file_id":136,"file_url":137,"file_type":138,"file_size":139,"view_count":105,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":36,"language":140,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":141,"faqs":142,"seo_title":143,"seo_description":67,"update_tm":130,"read_time":144,"preview_page_count":4},687197207057,"https://ap-avatar.wpscdn.com/davatar_29158cc5080c5b710cf443261637dec0","Estimating Macroeconomic News and Surprise Shocks  \nLutz Kilian, Michael D. Plante and Alexander W. Richter  \nWorking Paper 2304 April 2023 (Revised March 2024)  \nResearch Department  \n[https://doi.org/10.24149/wp2304r2](https://doi.org/10.24149/wp2304r2)  \nWorking papers from the Federal Reserve Bank of Dallas are preliminary drafts circulated for professional comment. The views in this paper are those of the authors and do not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.  \nEstimating Macroeconomic News and Surprise Shocks*  \nLutz Kilian†, Michael D. Plante‡ and Alexander W. Richter§  \nApril 16 , 2023  \nRevised: March 15, 2024  \nAbstract  \nThe importance of understanding the economic effects of TFP news and surprise shocks is widely recognized in the literature. A common VAR approach is to identify responses to TFP news shocks by maximizing the variance share of TFP over a long horizon. Under suitable conditions, this approach also implies an estimate of the surprise shock. We find that these TFP max share estimators tend to be strongly biased when applied to data generated from DSGE models with shock processes that match the TFP moments in the data, both in the presence of TFP measurement error and in its absence. Incorporating a measure of TFP news into the VAR model and adapting the identification strategy substantially reduces the bias and RMSE of the impulse response estimates, even when there is sizable measurement error in the news variable. When applying this method to the data, we find that news shocks are slower to diffuse to TFP and have a smaller effect on real activity than implied by the TFP max share method.  \nKeywords: Structural VAR; TFP; news; anticipated shocks; measurement error; max share  \nJEL Classifications: C32, C51, C61, E32  \n*  \nWe thank Filippo Ferroni for discussing our paper at the 2023 System Econometrics Meeting and Andrew Fieldhouse for discussing our paper at the 2024 American Economic Association Meeting. We also thank Francesco Bianchi, Danilo Cascaldi-Garcia, Oliver Coibion, Sinem Hacioğlu Hoke, Christian Matthes, and Todd Walker for helpful comments. The views expressed in this paper are our own and do not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System.  \n†Lutz Kilian, Federal Reserve Bank of Dallas, 2200 N Pearl Street, Dallas, TX 75201, and CEPR ([lkilian2019@gmail.com](lkilian2019@gmail.com)) .‡Michael D. Plante, Federal Reserve Bank of Dallas, 2200 N Pearl Street, Dallas, TX 75201 ([michael.plante@dal.frb.org](michael.plante@dal.frb.org)) .  \n§Alexander W. Richter, Federal Reserve Bank of Dallas, 2200 N Pearl Street, Dallas, TX 75201 ([alex.richter@dal.frb.org](alex.richter@dal.frb.org)) .  \nKILIAN, PLANTE & RICHTER: MACROECONOMIC NEWS AND SURPRISE SHOCKS  \n1 INTRODUCTION  \nThere is considerable interest in understanding the economic effects of shocks to expectations about future economic activity dating back to Pigou (1927) .1 Such news shocks have received particular attention in studies that explore the effects of shocks to total factor productivity (TFP) on macroeconomic aggregates, starting with Beaudry and Portier (2006) .  \nA common approach to identifying anticipated shocks to TFP (“news shocks”) is to use the max share estimator popularized by Uhlig (2003, 2004), Barsky and Sims (2011), and Francis et al. (2014) .2 This estimator identifies the news shock by selecting parameters for the structural impact multiplier matrix of a vector autoregressive (VAR) model to maximize the forecast error variance shares of TFP over a long horizon. Under suitable conditions, this estimator also implies an estimate of the unanticipated shock to TFP (“surprise shock”) . We will refer to this estimator asthe “TFP max share” estimator.  \nEarly applications of the TFP max share estimator imposed the restriction that the news shoc","cbCaigX7HpuK2C9s","https://ap.wps.com/l/cbCaigX7HpuK2C9s","pdf",759809,"English","# Abstract\n## Introduction\n## Identification strategy and related literature","[{\"question\":\"What is the “TFP max share” approach used in the paper?\",\"answer\":\"It identifies TFP news shocks in a structural VAR by choosing parameters to maximize the forecast error variance share of TFP over a long horizon, which can also imply a surprise shock estimate under suitable conditions.\"},{\"question\":\"Why can the TFP max share estimators be biased?\",\"answer\":\"They can become strongly biased when applied to DSGE-generated data where the shock processes match TFP moments in the data, regardless of whether TFP measurement error is present.\"},{\"question\":\"How does the proposed method improve impulse response estimates?\",\"answer\":\"The approach incorporates a direct measure of TFP news into the VAR model and adapts the identification strategy, substantially reducing both bias and RMSE even with sizable measurement error in the news variable.\"}]","Estimating Macroeconomic News and Surprise Shocks | PDF",101]