Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of St. Louis
Working Papers
Learning and structural change in macroeconomic data
James B. Bullard
John Duffy
Abstract

We include learning in a standard equilibrium business cycle model with explicit growth. We use the model to study how the economy's agents could learn in real time about the important trend-changing events of the postwar era in the U.S., such as the productivity slowdown, increased labor force participation by women, and the "new economy" of the 1990s. We find that a large fraction of the observed variance of output relative to trend can be attributed to structural change in our model. However, we also find that the addition of learning and occasional structural breaks to the standard and widely-used growth model results in a balanced growth puzzle, as our approach cannot completely account for observed trends in U.S. aggregate consumption and investment. Finally, we argue that a model-consistent detrending approach, such as the one we suggest here, is necessary if the goal is to obtain an accurate assessment of an equilibrium business cycle model.


Download Full text
Cite this item
James B. Bullard & John Duffy, Learning and structural change in macroeconomic data, Federal Reserve Bank of St. Louis, Working Papers 2004-016, 2004.
More from this series
JEL Classification:
Subject headings:
Keywords: Business cycles ; Economic development
For corrections, contact Anna Oates ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal