A note on growth expectation

Research output: Contribution to journalReview article

6 Citations (Scopus)

Abstract

Recently, several researchers have succeeded in producing expectation-driven cycles by balancing the tension between the wealth effect and the substitution effect stemming from the higher expected future productivity. Especially, seminal research by Christiano et al. ("Monetary Policy and Stock Market Boom-Bust Cycles", mimeo, Northwestern University, 2007), explains "stock market boom-bust cycles", characterized by increases in consumption, labor inputs, investment, and stock prices relating to high expected future technology levels. We, however, show that such expectation-driven cycles are difficult to generate based on "growth expectation", which reflects expectations of higher productivity growth rates.

Original languageEnglish
Pages (from-to)242-256
Number of pages15
JournalMacroeconomic Dynamics
Volume14
Issue number2
DOIs
Publication statusPublished - 2010 Apr 1
Externally publishedYes

Keywords

  • Equilibrium business cycle
  • Expectations
  • Technological progress

ASJC Scopus subject areas

  • Economics and Econometrics

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