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Are We There Yet? Looking for the New Economy


  • Simon van Norden


Over the past decade, questions over the impact of new information technologies on productivity growth trends have played an important role in the formulation of monetary policy, particularly in the United States and Canada. However, formal testing of whether the trend growth rate of aggregate productivity has changed significantly is rare, and the best work done to date appears to reach conflicting conclusions. The recent literature is also silent about our power to detect such changes; that is, the extent of the tradeoff between the size and persistence of a structural change in productivity and probability that the policy analyst might remain ignorant of its existence. This paper examines the existing evidence for a shift in aggregate trend productivity growth and attempts to assess its reliablity as a basis for policy making. First, it formally tests for recent changes in productivity growth trends using a new test for instability at the end of samples. Second, it uses a new real-time data set on aggregate Canadian productivity growth to assess the extent to which data revision complicates inference about trend growth rates. Third, simulations are used to quantify the degree to which the lag in detecting breaks may be affected by the size of the break.

Suggested Citation

  • Simon van Norden, 2005. "Are We There Yet? Looking for the New Economy," Computing in Economics and Finance 2005 337, Society for Computational Economics.
  • Handle: RePEc:sce:scecf5:337

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    References listed on IDEAS

    1. Alfonso Novales & Emilio Dominguez & Javier J. Perez & Jesus Ruiz, 1998. "Solving Non-linear Rational Expectations Models By Eigenvalue-Eigenvector Decompositions," QM&RBC Codes 124, Quantitative Macroeconomics & Real Business Cycles.
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    More about this item


    Productivity growth; structural breaks; breaking trends; real-time data;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables


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