Long-Run Growth Uncertainty

Location
J G Smith building, Room 210
Dates
Monday 18th January 2016 (12:00-13:00)
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This event is part of the Department of Economics Internal Seminar Series.

Speaker: Dr Pei Kuang

Speaker biography

Dr Pei Kuang is Lecturer in Macroeconomics. He received his Ph.D. from the Goethe University Frankfurt (Germany) and joined the Department of Economics in August 2012. His research focuses on empirical and theoretical analysis of imperfect knowledge in Macro and Finance with an emphasis on macroeconomic policy making and issues related to expectation formation and learning.

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.