|November 2006 Volume 12, Number 8|
|JEL classification: O4, O51, C32|
Authors: James A. Kahn and Robert W. Rich
Because volatile short-term movements in productivity growth obscure the underlying trend, shifts in this trend may go unrecognized for years—a lag that can lead to policy mistakes and hence economic instability. This study develops a model for tracking productivity that brings in additional variables to help reveal the trend. The model’s success is evident in its ability to detect changes in trend productivity within a year or two of their occurrence. Currently, the model indicates that the underlying trend remains strong despite recent weak productivity data.
|Kahn-Rich Productivity Model Update
Note: The trend productivity growth forecast is now maintained offsite. Look for it on Google Sites. Please direct any questions to Robert Rich at the Cleveland Fed.