PRODUCTIVITY GROWTH, CONSUMER CONFIDENCE AND THE BUSINESS-CYCLE

The objective of this paper is to provide, in the context of a dynamic general equilibrium model, an answer to the following five questions: 1. To what extent does an economy subject to regular variations in la bor productivity growth differ from one where labor productivity is co nstant? 2. What is the impact on major macro indicators of a one-time change in labor productivity growth? 3. What are the business cycle im plications of autonomous (non-falsifiable) changes in growth expectati ons? 4. What is the potential of such expectation changes for explaini ng the volatility of consumption to output ratio? 5. Can autonomous ch anges in growth expectations help us understand recent business cycle episodes? (C) 1998 Published by Elsevier Science B.V. All rights reser ved.