Shifting Expectations about Technology Growth as a Propagation Mechanism

Masashi Saito ()
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Masashi Saito: Economics Boston University

No 387, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: Growth rates of macro aggregates are more persistent than technology growth in data. We develop a theory that accounts for this observation. In the model there are two types of shocks affecting the growth rate of technology, one transitory and another persistent, but agents do not observe them separately and form a belief about their relative contribution. The process of belief updating serves as a propagation mechanism enabling the model to generate movements in macro growth rates more persistent than that of the driving force

Keywords: real business cycle model; imperfect information; regime switching (search for similar items in EconPapers)
JEL-codes: E1 E3 (search for similar items in EconPapers)
Date: 2005-11-11
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

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