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Learning About New Eras

Author

Listed:
  • Michael Sampson

    (Department of Economics Concordia University)

Abstract

Non-ergodic regime changes or New Eras (wars, inventions and epidemics) create a form of parameter uncertainty that peaks at the time of the regime change and then falls as sample data is collected. This parameter uncertainty can have a large impact on economic behavior. We propose a welfare measure of the importance of this parameter uncertainty and apply it to the post World War II U.S. economy. Our results suggest it took until the middle of the 1970's before this parameter uncertainty was resolved.

Suggested Citation

  • Michael Sampson, 2023. "Learning About New Eras," Annals of Economics and Finance, Society for AEF, vol. 24(1), pages 1-12, May.
    • Handle: RePEc:cuf:journl:y:2023:v:24:i:1:sampson
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    References listed on IDEAS

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    1. Robert J. Gordon, 1986. "The American Business Cycle: Continuity and Change," NBER Books, National Bureau of Economic Research, Inc, number gord86-1, January.
    2. Robert J. Gordon, 1986. "Front matter, The American Business Cycle. Continuity and Change," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages -15, National Bureau of Economic Research, Inc.
    3. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    4. Christina D. Romer, 1990. "The Great Crash and the Onset of the Great Depression," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 597-624.
    5. Sampson, Michael, 2003. "New Eras and Stock Market Bubbles," Structural Change and Economic Dynamics, Elsevier, vol. 14(3), pages 297-315, September.
    6. W. S. Woytinsky, 1947. "What Was Wrong in Forecasts of Postwar Depression?," Journal of Political Economy, University of Chicago Press, vol. 55(2), pages 142-142.
    7. Michael Sampson, 2022. "The Effect of Parameter Uncertainty on Consumption, Wealth, and Welfare," Annals of Economics and Finance, Society for AEF, vol. 23(1), pages 1-10, May.
    8. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    9. Michael Sampson, 1998. "The Implications of Parameter Uncertainty for Irreversible Investment Decision," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 900-914, November.
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    Keywords

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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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