Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202670 
Year of Publication: 
2016
Series/Report no.: 
Birmingham Business School Discussion Paper Series No. 2016-06
Publisher: 
University of Birmingham, Birmingham Business School, Birmingham
Abstract: 
Observed macroeconomic forecasts display gradual recognition of the long-run growth of endogenous variables (e.g. output, output per hour) and a positive correlation between long-run growth expectations and cyclical activities. Existing business cycle models appear inconsistent with the evidence. This paper presents a model of business cycle in which households have imperfect knowledge of the long-run growth of endogenous variables and continually learn about this growth. The model features comovement and mutual influence of households' growth expectations and market outcomes, which can replicate the evidence, and suggests a critical role for shifting long-run growth expectations in business cycle fluctuations.
Subjects: 
Trend
Expectations
Business Cycle
JEL: 
E32
D84
URL of the first edition: 
Creative Commons License: 
cc-by-nc-sa Logo
Document Type: 
Working Paper

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