IDEAS home Printed from
   My bibliography  Save this paper

Learning and Shifts in Trend Growth


  • Rochelle M. Edge
  • Thomas Laubach


Shifts in the underlying growth rate of productivity, such as occurred in the 1970s and the 1990s, are relatively rare and difficult to identify in real time. In this paper, we document that economists' projections of trend productivity growth adjust gradually to shifts in trend growth. We find that long-run expectations of growth are well described by a simple updating rule based on an estimated Kalman filter model. We then examine the effects of shifts in trend productivity growth in an optimization-based growth model. If immediately recognized, an increase in the trend growth causes long-term interest rates to rise and a sharp decline in employment and investment. In contrast, with gradual learning, a productivity acceleration sets off a sustained employment and investment boom and a gradual rise in long-term interest rates, a pattern consistent with the experience of the 1990s

Suggested Citation

  • Rochelle M. Edge & Thomas Laubach, 2004. "Learning and Shifts in Trend Growth," 2004 Meeting Papers 97, Society for Economic Dynamics.
  • Handle: RePEc:red:sed004:97

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item


    Kalman filter; real-time data; productivity; signal extraction;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed004:97. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.