Structural Breaks in an Endogenous Growth Model

Timothy Cogley and Boyan Jovanovic ()

The Review of Economic Studies, 2022, vol. 89, issue 2, 666-694

Abstract: We study the effects of parameter uncertainty prompted by structural breaks. In our model, agents respond differently to uncertainty prompted by regime shifts in shock processes than they react to comparable perceived increases in shock volatility. The magnitude of the response to an increase in uncertainty about TFP associated with a structural break is greater than that of a response to a comparable perceived rise in volatility. This is because lifetime utility varies more when shocks shift beliefs and perceived wealth.

Keywords: Structural breaks; Uncertainty shocks; General equilibrium; Volatility shocks; Learning; E21; O41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Working Paper: Structural Breaks in an Endogenous Growth Model (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:89:y:2022:i:2:p:666-694.

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