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Trend TFP Growth in the United States: Forecasts versus Outcomes

Nicholas Crafts () and Terence C. Mills
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Terence C. Mills: Loughborough University

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: We analyze TFP growth in the U.S. business sector using a basic unobserved component model where trend growth follows a random walk and the noise is a first order autoregression. This is fitted using a Kalman-filter methodology. We find that trend TFP growth has declined steadily from 1.5 to 1.0 per cent per year over the last 50 years. Nevertheless, recent trends are not a good guide to actual medium-term TFP growth. This exhibits substantial variations and is quite unpredictable. Technooptimists should not give best to secular stagnationists simply because recent TFP growth has been weak.

Keywords: productivity slowdown; secular stagnation; TFP growthJEL Classification: E32; N12; O47 (search for similar items in EconPapers)
Date: 2017
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