I posted on my “current work” page a new paper with Paul Beaudry “On The Quantitative Importance of Non-fundamentalness for News Shocks“. As written in the abstract,
It has been rightly suggested (see e.g. Forni and Gambetti  and Forni, Gambetti, and Sala ) that the identification of news shocks can be subject to non- fundamentalness. In this note we first illustrate why non-fundamentalness is not an either/or question, but is a quantitative issue which can be more or less severe. Second, we use the approach suggested by Forni, Gambetti, and Sala  to re-examine whether non-fundamentalness is likely an important problem for the identification of news shocks. Using our preferred strategy for identifying news shocks, we find that non-fundamentalness is quantitatively unimportant and that news shocks continue to generate significant business cycle type fluctuations when adjust the estimating procedure to take into account the potential non-fundamentalness issue.
Key Words are News, Business Cycles, Non-Fundamentalness.
JEL Classification code is E3.