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Long Run Growth Uncertainty

Listed author(s):
  • Pei Kuang
  • Kaushik Mitra

A model of business cycles in which households do not have knowledge of the long-run growth of endogenous variables and continually learn about this growth is presented. The model features comovement and mutual reinforcement of households growth expectations and market outcomes and suggests a critical role for shifting long-run growth expectations in business cycle fluctuations. There are important implications for estimating the output gap and the derived cyclically-adjusted fiscal budget balance computed by policy making institutions.

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File URL: ftp://ftp.bham.ac.uk/pub/RePEc/pdf/15-13.pdf
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Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 15-13.

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Length: 62 pages
Date of creation: Jun 2015
Handle: RePEc:bir:birmec:15-13
Contact details of provider: Postal:
Edgbaston, Birmingham, B15 2TT

Web page: http://www.economics.bham.ac.uk

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