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Estimating and Forecasting Aggregate Productivity Growth Trends in the US and Germany

  • Georg Erber
  • Ulrich Fritsche

This paper addresses the issue of estimating and forecasting productivity growth trends in the US and Germany from the perspective of a business cycle researcher who wants to use the available information in time series of aggregate labor productivity to derive a model for short- and/or long-term forecasts of labour productivity. We will use stability tests and a deterministic model with structural breaks that is estimated using the methods mentioned in Hansen (2001). The methodological approach also draws on Gordon (2003) using a Kalman filter specification. We discuss the implications of unit-root assumptions for long-term forecasts and argue in favor of a near unit-root modelling. That implies a convergence of productivity growth rates in both countries within the next 15 years.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 471.

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Length: II, 30 p.
Date of creation: 2005
Date of revision:
Handle: RePEc:diw:diwwpp:dp471
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  1. Rosenberg,Nathan, 1994. "Exploring the Black Box," Cambridge Books, Cambridge University Press, number 9780521452700.
  2. Julio J. Rotemberg & Lawrence H. Summers, 1990. "Inflexible Prices and Procyclical Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 105(4), pages 851-874.
  3. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  4. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
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