Learning and Shifts in Trend Growth
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
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" 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.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
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)
If references are entirely missing, you can add them using this form.