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Long-Run Growth Uncertainty

Kuang, Pei and Mitra, Kaushik (2016) Long-Run Growth Uncertainty. Discussion Paper. University of Birmingham, Birmingham UK.

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Observed macroeconomic forecasts display gradual recognition of the long-run growth of endogenous variables (e.g. output, output per hour) and a positive correlation between long-run growth expectations and cyclical activities. Existing business cycle models appear inconsistent with the evidence. This paper presents a model of business cycle in which households have imperfect knowledge of the long-run growth of endogenous variables and continually learn about this growth. The model features comovement and mutual influence of households' growth expectations and market outcomes, which can replicate the evidence, and suggests a critical role for shifting long-run growth expectations in business cycle fluctuations.
JEL classifications: E32, D84

Type of Work:Monograph (Discussion Paper)
School/Faculty:Colleges (2008 onwards) > College of Social Sciences
Number of Pages:54
Department:Birmingham Business School
Date:11 March 2016
Series/Collection Name:Birmingham Business School Discussion Paper Series
Keywords:Trend, Expectations, Business Cycle
Subjects:H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
Copyright Status:This discussion paper is copyright of the University and the author. In addition, parts of the paper may feature content whose copyright is owned by a third party, but which has been used either by permission or under the Fair Dealing provisions. The intellectual property rights in respect of this work are as defined by the terms of any licence that is attached to the paper. Where no licence is associated with the work, any subsequent use is subject to the terms of The Copyright Designs and Patents Act 1988 (or as modified by any successor legislation). Any reproduction of the whole or part of this paper must be in accordance with the licence or the Act (whichever is applicable) and must be properly acknowledged. For non-commercial research and for private study purposes, copies of the paper may be made/distributed and quotations used with due attribution. Commercial distribution or reproduction in any format is prohibited without the permission of the copyright holders.
Copyright Holders:The Authors and the University of Birmingham
ID Code:2118

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