This paper investigates the effect of a news-based policy shock on consumption and investments. To this end, we construct a new measure of policy announcements, the Policy News Index (PNI), by analysing textual data from the most important Italian business newspaper ( \(\textit{Il Sole 24 Ore}\) ). To disentangle news and noise from fiscal policy communication, we provide measures of newspaper coverage of policy announcements purged from uncertainty. Using a Bayesian vector autoregression (BVAR), we estimate the response of households and firms to a news shock on government spending. The results indicate that the news or foresight shock has delayed effects on government spending, consumption, and investments. Agents receive mixed signals from newspapers about government spending changes, and they do not react before changes have been fully implemented due to a lack of trust. We also show that the confidence channel plays a crucial role in conveying the shock. Our results provide evidence that outcomes are expectations-driven.
