Long Run Growth Uncertainty

Pei Kuang and Kaushik Mitra

Discussion Papers from Department of Economics, University of Birmingham

Abstract: A model of business cycles in which households do not have knowledge of the long-run growth of endogenous variables and continually learn about this growth is presented. The model features comovement and mutual reinforcement of households growth expectations and market outcomes and suggests a critical role for shifting long-run growth expectations in business cycle fluctuations. There are important implications for estimating the output gap and the derived cyclically-adjusted fiscal budget balance computed by policy making institutions.

Keywords: Trend; Expectations; Business Cycle; Output Gap; cyclically-Adjusted Budget Balance (search for similar items in EconPapers)
JEL-codes: D84 E32 E62 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2015-06
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://repec.cal.bham.ac.uk/pdf/15-13.pdf

Related works:
Journal Article: Long-run growth uncertainty (2016)
Working Paper: Long-Run Growth Uncertainty (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bir:birmec:15-13

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