Tracking the new economy: Using growth theory to detect changes in trend productivity

Abstract

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Trend growth expectations and U.S. house prices before and after the crisis

“…The model of learning about trend growth is based on Edge, Laubach, and Williams (2007). The paper perhaps most closely related to ours is Kahn (2008), who uses an alternative information structure concerning trend growth based on Kahn and Rich (2007). However, Kahn (2008) does not consider any role for financial frictions and the resulting borrowing constraints in explaining housing price movements, a feature that we highlight in our analysis.…”

“…Also, the value of mortgage debt to disposable income has increased persistently, suggesting changes in financial instruments in the housing market. 19 Thus there may have been an increase in the amount of funds that impatient households may borrow against given collateral, raising demand for housing, and in turn push house prices further. Likewise, the collapse of the housing market would have been the consequence of the reversal in lending standards, triggered by the problems in the financial sector following the Lehman bankruptcy.…”

Strengthening Innovation in the United States

“…While MFP growth picked up in the late 1990s and early 2000s as the diffusion of ICT pushed up productivity growth, especially in the distribution sector, these high rates have not been sustained. Rich (2007 and estimate that there is a high probability that productivity growth has fallen back to the lower rate recorded over most of the period since the 1970s. Although MFP growth may have slowed, it still compares favourably with that in many other OECD countries, suggesting that the United States still has some advantages, most likely in the effective use of information technology to support changes in business practices (Brynjolfsson and Saunders, 2010).…”

Hours per capita and productivity: evidence from correlated unobserved components models

“…Recent evidence on trend productivity growth, such as Kahn and Rich (2007), Roberts (2001), and Perron and Wada (2005), show that a constant drift term may not be appropriate as ignoring time variation in the drift may bias the results. Fernald (2007) argues that time variation in long-term productivity growth could be creating a bias in the structural VAR estimates.…”