Title: Tracking the new economy
Description: "The acceleration of productivity since 1995 has prompted a debate over whether the economy's underlying growth rate will remain high.  In this paper, we propose a methodology for estimating trend growth that draws on growth theory to identify variables other than productivity--namely consumption and labor compensation--to help estimate trend productivity growth.  We treat that trend as a common factor with two "regimes" high-growth and low-growth.  Our analysis picks up striking evidence of a switch in the mid-1990s to a higher long-term growth regime, as well as a switch in the early 1970s in the other direction.  In addition, we find that productivity data alone provide insufficient evidence of regime changes; corroborating evidence from other data is crucial in identifying changes in trend growth.  We also argue that our methodology would be effective in detecting changes in trend in real time: In the case of the 1990s, the methodology would have detected the regime switch within two years of its actual occurrence according to subsequent data"--Federal Reserve Bank of New York web site.
Subjects: Economic development, Industrial productivity