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Tracking productivity in real time

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  • James A. Kahn
  • Robert W. Rich

Abstract

Because volatile short-term movements in productivity growth obscure the underlying trend, shifts in this trend may go unrecognized for years - a lag that can lead to policy mistakes and hence economic instability. This study develops a model for tracking productivity that brings in additional variables to help reveal the trend. The model's success is evident in its ability to detect changes in trend productivity within a year or two of their occurrence. Currently, the model indicates that the underlying trend remains strong despite recent weak productivity data.

Suggested Citation

  • James A. Kahn & Robert W. Rich, 2006. "Tracking productivity in real time," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 12(Nov).
  • Handle: RePEc:fip:fednci:y:2006:i:nov:n:v.12no.8
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    References listed on IDEAS

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    1. Hamilton, James D., 1988. "Rational-expectations econometric analysis of changes in regime : An investigation of the term structure of interest rates," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 385-423.
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    Cited by:

    1. Oliner, Stephen D. & Sichel, Daniel E. & Stiroh, Kevin J., 2008. "Explaining a productive decade," Journal of Policy Modeling, Elsevier, vol. 30(4), pages 633-673.

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