Tracking the new economy: using growth theory to detect changes in trend productivity
James Kahn () and
Robert Rich ()
No 159, Staff Reports from Federal Reserve Bank of New York
The acceleration of productivity since 1995 has prompted a debate over whether the economy's underlying growth rate will remain high. In this paper, we propose a methodology for estimating trend growth that draws on growth theory to identify variables other than productivity namely consumption and labor compensation to help estimate trend productivity growth. We treat that trend as a common factor with two "regimes," high-growth and low-growth. Our analysis picks up striking evidence of a switch in the mid-1990s to a higher long-term growth regime, as well as a switch in the early 1970s in the other direction. In addition, we find that productivity data alone provide insufficient evidence of regime changes; corroborating evidence from other data is crucial in identifying changes in trend growth. We also argue that our methodology would be effective in detecting changes in trend in real time: In the case of the 1990s, the methodology would have detected the regime switch within two years of its actual occurrence according to subsequent data.
Keywords: Economic development; Consumption; Wages; Time-series analysis (search for similar items in EconPapers)
JEL-codes: C32 O4 O51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Note: For a published version of this report, see James A. Kahn and Robert Rich, "Tracking the New Economy: Using Growth Theory to Detect Changes in Trend Productivity," Journal of Monetary Economics 54, no. 6 (September 2007): 1670-701.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
Journal Article: Tracking the new economy: Using growth theory to detect changes in trend productivity (2007)
Journal Article: Tracking the new economy: using growth theory to detect changes in trend productivity (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:159
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by ().