Productivity Shocks, Learning, and Open Economy Dynamics /
I study the implications of productivity shocks in a model where agents observe the aggregate level of productivity but not its permanent and transitory components separately. The model's predictions under learning differ substantially from those under full information and are in line with seve...
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| Format: | Journal |
| Language: | English |
| Published: |
Washington, D.C. :
International Monetary Fund,
2004.
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| Series: | IMF Working Papers; Working Paper ;
No. 2004/088 |
| Online Access: | Full text available on IMF |
| Summary: | I study the implications of productivity shocks in a model where agents observe the aggregate level of productivity but not its permanent and transitory components separately. The model's predictions under learning differ substantially from those under full information and are in line with several empirical findings: (i) the response of investment to a permanent shock is sluggish and peaks with delay; (ii) permanent shocks generate positive rather than negative savings on impact; and (iii) saving and investment are highly correlated despite the assumption of capital mobility. Unlike other standard explanations of the Feldstein-Horioka puzzle, learning induces high correlations irrespective of the assumed persistence of shocks. |
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| Item Description: | <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required |
| Physical Description: | 1 online resource (28 pages) |
| Format: | Mode of access: Internet |
| ISSN: | 1018-5941 |
| Access: | Electronic access restricted to authorized BRAC University faculty, staff and students |