Structural Breaks in an Endogenous Growth Model

Timothy Cogley () and Boyan Jovanovic ()

No 28026, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E1 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-mac and nep-ore
Note: EFG
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Published as Timothy Cogley & Boyan Jovanovic, 2022. "Structural Breaks in an Endogenous Growth Model," The Review of Economic Studies, vol 89(2), pages 666-694.

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Journal Article: Structural Breaks in an Endogenous Growth Model (2022)
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